Missouri voters overwhelmingly rejected a proposed constitutional amendment that would have given state lawmakers the ability to expand sales and use taxes in order to eliminate the state income tax.
Amendment 5 failed Tuesday, with 83% of the ballots cast being no votes when the election was called at 8:15 p.m.
The failure of Amendment 5 is a major blow to Gov. Mike Kehoe and other Republicans who supported it. Kehoe prioritized the elimination of the income tax in his State of the State address this year.
The result means lawmakers still cannot expand sales and use taxes in the state without voter approval.
Proponents of Amendment 5 said eliminating the state income tax would have spurred growth in Missouri, including drawing more people to live in the state.
They also referenced other states that don’t have an income tax that are growing, like Florida and Tennessee.
Opponents of Amendment 5 called the measure a fund swap between the state income tax and state sales and use taxes that would have ultimately cost lower-income Missourians more.
Lawmakers didn’t need voter approval to eliminate the income tax. In prior sessions, they already passed income tax cuts.
The nonpartisan Missouri Budget Project said the state’s income tax provides around $8.5 billion in state revenue annually. That’s more than half of the general revenue the state sees each year.
To make up for that revenue, other taxes, like sales and use taxes, would have needed to be expanded and likely raised.
The Missouri Budget Project says 80% of people in the state would have seen a net tax increase, with the average Missourian paying over $500 more in taxes annually.
Rep. Bishop Davidson, R-Republic, who sponsored the amendment, said he believed the possible future sales tax would have been between 4% and 6%.
Missouri’s current state sales tax is 4.225%, which doesn’t include local sales taxes.
Under the amendment, the General Assembly would have eliminated the income tax by requiring reductions to the top tax rate based on revenue growth.
Once the income tax was eliminated, lawmakers would have been unable to reinstate any version of an income tax unless voters approved a different constitutional amendment.
The proposal gave a five-year window to expand transaction-based taxes, like sales taxes, to make up for lost income tax revenue.
What the expanded sales and use taxes would be was unknown. That’s because there was no set plan within Amendment 5 of what would be taxed and what would be exempt.
When introducing the plan in January, Kehoe said he would never support extending sales taxes on agriculture, health care or real estate.
However, no exemptions were specifically listed within Amendment 5. Lawmakers would have been responsible for outlining those exemptions.
