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.
In a statement issued Tuesday evening, Kehoe said that while Amendment 5 failed, the work “is far from over.”
“I remain committed to working with the General Assembly in the years ahead on ways to continue cutting taxes, growing our state’s economy, and pursuing conservative policies that help Missouri families keep more of what they earn,” Kehoe said.
The result means lawmakers still cannot expand sales and use taxes in the state without voter approval.
House Minority Leader Ashley Aune, D-Kansas City, said when talking with voters across the state it was clear that Amendment 5 was deeply unpopular.
“I knew that it was going to fail. I am genuinely surprised by how much it failed by, but I'm heartened because that tells me that Missouri voters are paying attention and they are unwilling to be fooled by the Missouri GOP,” Aune said.
Proponents of Amendment 5 said eliminating the state income tax would have spurred growth in Missouri, including by 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.
Joe Lamie with Missouri Promise PAC, which supported Amendment 5, said that while the group is disappointed with the results, “our commitment to lowering taxes for Missouri families and strengthening our state's economy remains unchanged.”
“Gov. Kehoe deserves credit for thinking big, and we will continue to work alongside him to reduce the tax burden on hardworking Missourians and advance policies that help our state grow and prosper,” Lamie said.
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.
Amy Blouin, with the nonpartisan Missouri Budget Project, believes part of Amendment 5’s troubles was the lack of information.
“This is the Show-Me State and they did not get shown what the details were, and I think that was a significant part,” Blouin said. “But I also think there were real concerns about the shift from income tax to sales tax and the implications that has for real people.”
Blouin also said she was astounded by how many Missourians came out for the election.
“Amendment 5 was a real pocketbook issue, and they did not buy the desire to, or the requirement to trust lawmakers that they would figure it out,” Blouin said.
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.
Jay Hardenbrook with AARP Missouri said he hopes the failure of Amendment 5 sends the message that there is a desire for tax relief, just not in this way.
“This I think was probably a little too broad and didn't have the full plan laid out for people. So I really hope that we can move forward, work with the governor, work with the General Assembly, and come up with some real tax benefits that can help, especially for us, continue to help older folks throughout the state of Missouri,” Hardenbrook said.
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.
