Missouri Voters Decide Whether To Eliminate State Income Tax And Expand Sales Tax

Missouri voters are set to decide whether to eliminate the state’s individual income tax, a proposal that would also authorize a sales tax expansion, according to Associated Press reporting from JEFFERSON CITY, Mo.

“In one state, voters will get to decide whether to eliminate the income tax”

Associated Press

The AP says the question will appear on a Missouri ballot later this year and would mark “the first time since the modern income tax began over a century ago that a U.S. state legislature has asked voters whether to eliminate the tax.”

Associated Press

The AP describes Missouri’s approach as a cap on a “five-year tax-cutting binge,” while noting that during the COVID-19 recovery “almost every state made either permanent or temporary reductions” to some type of tax.

The Inquirer and Syracuse editions of the same AP story repeat that if voters say “yes,” they will also be authorizing a sales tax expansion, and both versions emphasize that the legislature would have five years to decide which additional sales to tax.

The Mexico Ledger adds that the House voted 95-59 on April 21 to put the gradual elimination of the state personal income tax on the November ballot.

It also reports that the House vote was mostly along party lines and that the resolution is House Joint Resolutions 173, sponsored by Rep. Bishop Davidson, R-Republic, after it had been combined with HJR 174 sponsored by House Speaker Jonathan Patterson, R-Lee’s Summit.

In the same reporting, the Mexico Ledger says the measure would amend the state constitution to gradually decrease the state’s income tax .01% for every $20 million in the state’s general revenue, with a cap of a 1.6% reduction per year.

The Associated Press account says Missouri’s proposed constitutional amendment directs the General Assembly to eliminate the individual income tax through gradual reductions based on revenue growth, and it adds that the plan “gives lawmakers the authority to raise revenues by imposing the sales tax on ‘any goods and services’.”

The AP also says the legislature would have five years to decide which additional sales to tax without needing another vote of the people, while warning that “some voters may not realize they are authorizing more sales taxes” because the ballot wording asks whether to phase out the income tax and “modify” the sales tax.

Inquirer

The Inquirer version similarly states that the ballot wording asks whether to phase out the income tax and “modify” the sales tax — avoiding the words “increase” or “expand.”

The Mexico Ledger provides the mechanics in more specific terms, saying the constitution would be amended to gradually decrease the state’s income tax .01% for every $20 million in the state’s general revenue, with a cap of a 1.6% reduction per year, and that “When the tax rate reaches 1.4%, individual income tax would be totally eliminated.”

It also says the resolution would allow a future general assembly to raise sales tax and expand taxes on “any goods and services” to compensate for lost revenue.

The Kansas City Beacon adds that the proposal “would direct the Missouri General Assembly to set revenue baselines and triggers for reductions in the income tax rate,” and it states that “legislators would get broad authority to increase state sales taxes or expand what is subject to sales tax for the next five years.”

That same Beacon report says that “Any changes to the sales tax that would generate more revenue must be tied to reductions in the top income tax rate,” and it contrasts the proposal with the current requirement that “legislators must get approval from voters before implementing new sales taxes.”

The Mexico Ledger describes a House floor debate that lasted more than two hours, with the resolution combined with HJR 174, and it frames the vote as disliked by Democrats while being “mostly along party lines.”

It quotes Rep. Bishop Davidson, R-Republic, saying, “The source of wealth for the middle class comes from their income,” and it reports that Davidson argued the elimination would help put more money in the pocket of middle class Missourians.

The same article includes a question from Rep. George Hruza, R-St. Louis, asking, “Do we want to continue to be in the middle of the pack, as has been mentioned, or do we want to lead,” and it records that supporters pointed to other states that have eliminated their income taxes.

On the opposition side, the Mexico Ledger quotes Rep. Betsy Fogle, D-Springfield, saying, “None of us are guaranteed to be back next year,” and it adds her warning that “The people who are making promises won’t be here in subsequent years to make good on these promises.”

It also quotes Rep. Eric Woods, D-Kansas City, saying, “Food is not voluntary,” and “Paying for rent is not voluntary. Paying for health care and childcare are not voluntary.”

The Kansas City Beacon shifts from legislative debate to the lived impact, describing low-income workers’ fears and quoting LaTonya Sullivan: “I’m looking at possibly losing our house.”

The Beacon also quotes Sullivan saying, “It’s emotional for me, because I see it every day,” and it says she sees the struggles “at work” and “at home.”

The Kansas City Beacon provides detailed figures about the fiscal and household impact of the Missouri proposal, including an estimate that “80% of Missourians will see their tax burden increase under the plan.”

It says that “Income taxes now generate roughly $9.2 billion in state revenue,” and it estimates that “Unless the state expands the sales tax to things that are not currently taxed, it is estimated the state would have to increase the state sales tax rate by 8.5 percentage points to bring in the same revenue.”

The Kansas City Beacon

The Beacon then gives a specific rate projection, stating that this would increase Missouri’s sales tax rate “currently 4.225%, with 3% going toward state general revenue — to 12.725%.”

It also reports that Missouri Budget Project estimates that “80% of Missourians would see their net tax cost increase,” while “In comparison, the 20% of Missourians — defined as those making $300,000 or more a year — would see their overall taxes decrease.”

The Beacon adds that “The sales tax rate could be lower if lawmakers expand what can be taxed,” but it notes that “several major industries like agriculture, real estate and healthcare have tax exemptions.”

It also quotes Sarah Narkiewicz, the director of the Low Income Taxpayer Clinic at Washington University in St. Louis, saying, “Generally, those people are not the people that are going to be focused on low- and middle-income people,” and it adds, “They’re focused on businesses and wealthier individuals.”

The Beacon further describes how low-income workers may not benefit from eliminating income taxes because “Many low-income and working families already do not pay state income taxes,” and it defines low-income as when “their family’s taxable income for the preceding year did not exceed 150% of the federal poverty line.”

The Associated Press reports that the amendment, which was approved last week by the legislature, will appear on the November ballot unless Republican Gov. Mike Kehoe sets an election sooner, and it frames Kehoe’s stance as making individual income tax repeal a priority.

“Missouri residents will be asked to vote on eliminating the state’s individual income tax this fall”

The Mexico Ledger

The AP says Kehoe argues repeal will spur the economy while attracting businesses and new residents, and it quotes Will Spartin at a House committee hearing earlier this year, where Spartin said he “located the headquarters of his beverage businesses in Florida because that state has no individual income tax.”

The Mexico Ledger

Spartin told lawmakers, “If Missouri moves in this direction, even gradually, it would be a meaningful signal to people like us that Missouri wants to compete for modern industries,” according to the Syracuse/AP text.

The Mexico Ledger adds that income tax elimination was one of Gov. Mike Kehoe’s goals for the legislative year and says he made it part of his campaign and urged during his State of the State address in January.

It also quotes Rep. Brad Banderman, R-St. Clair, saying, “We are literally on the cusp of an opportunity to transform our state.”

The Kansas City Beacon says the proposal “awaits Gov. Mike Kehoe’s decision on whether it will appear on the August or November ballot,” and it describes the stakes for low-income workers if the plan leads to revenue shortfalls and cuts to state-run services.

In the Mexico Ledger, Democrats argue the ballot is being used to include the sales tax increase, which would need voter approval unlike a decrease in sales tax, and it quotes House Minority Leader Ashley Aune, D-Kansas City, saying, “They absolutely can remove the income tax statutorily.”