Income tax vs. sales tax: Missouri voters decide
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KCMO voters will likely decide this year whether to begin phasing out Missouri's income tax and let lawmakers expand sales tax to make up the difference.
Why it matters: Missouri collected $9.2 billion in individual income tax last year, about 65% of state revenue. Replacing that money would require adding about 8.5% to the state sales tax unless lawmakers start taxing things that are currently exempt, the St. Louis Post-Dispatch reported.
Catch up quick: The Missouri General Assembly on Friday wrapped up its 2026 session with a proposed constitutional amendment headed to voters.
- HJR 173 would phase out the state's 4.7% top income tax rate based on revenue growth triggers and give lawmakers five years to write a new sales tax law to offset the loss.
- Gov. Mike Kehoe has until May 22 to decide whether it goes on the Aug. 4 primary ballot or the Nov. 3 general election ballot.
State of play: The current sales tax exempts groceries, prescription drugs and residential utilities. But those carve-outs aren't locked in. Lawmakers could start taxing them to make up the difference.
- Other exemptions that could end up getting taxed include real estate transfers and services like haircuts, legal work and car repairs.
What they're saying: Kehoe has called eliminating income tax a way to make Missouri more competitive with other states that don't tax individual income, such as Tennessee and Texas.
The other side: Missouri Budget Project president and CEO Amy Blouin called the proposal a "misleading tax scheme" that would hit working families hardest.
- "While the richest Missourians will pad their investment accounts, the vast majority of us will be subject to whopping increased costs for everything from home repairs to car insurance to burial services," Blouin said in a statement.
What we're watching: A lawsuit filed Wednesday in Cole County Circuit Court is asking a judge to strike the amendment from the ballot, arguing lawmakers bundled too many subjects into one proposal.