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The economics of eliminating Missouri’s income tax – Beacon: Missouri

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The economics of eliminating Missouri’s income tax – Beacon: Missouri


Take two steps into the Missouri Statehouse this session and the words “income tax” will inevitably come up. 

Takeaways
  1. Proposed legislation would reduce the state’s top tax rate by 0.01% for every $20 million in revenue that exceeds the previous year’s collection, adjusted annually for inflation. In exchange, the General Assembly would be granted broad authority to change sales taxes without additional voter approval.
  2. Although Missouri has remained solidly middle of the pack for economic and population growth, supporters say eliminating income tax would help make Missouri more attractive to businesses. Eight other states without income taxes consistently rank higher for economic growth.
  3. But, Missouri’s dependence on income tax revenue is much greater than other states’, making up roughly 65% of state revenue. Missouri also lacks the natural resources or tourism that other states have, meaning sales taxes would likely have to be increased to help offset the lost dollars.

That’s because the General Assembly is debating House Joint Resolutions 173 & 174. The resolutions propose gradually eliminating the state’s income tax. It would also authorize the legislature to offset any losses by expanding the sales tax base or rate.

The proposal states that if net revenue collections exceed fiscal year 2027’s collections by $20 million or more, it would trigger a one-hundredth of a percentage point reduction in the state’s top tax rate. Those targets would be adjusted for inflation. Once the rate dips below 1.4%, the rate is instead zero.

The state’s top tax rate currently is 4.7% on any income that exceeds $9,191. 

The legislation’s target date to get rid of the income tax is 2032. Once it’s eliminated, the state would not be allowed to reinstate an income tax in the future.

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In exchange, the legislature would have broad authority for the next five years to increase sales tax rates or expand the base of goods and services that could be taxed without approval from voters.

Currently, the legislature is limited by the Hancock Amendment to $144.4 million in what new fees or taxes could generate without needing voter approval. Due to a 2016 amendment, it also cannot expand the sales tax base beyond what was already subject to it before 2015.

If it passes both chambers, voters will still need to approve the measure at the ballot in November. 

The legislation has drawn stakeholders from across the state. During a Senate committee public hearing on April 1, so many people showed up to testify on the legislation, for and against, that they spilled into the hallway where they waited to be called in.

Starkly opposing narratives were heard.

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On one hand, advocates say eliminating the tax will encourage economic growth, increased savings and more government transparency. On the other hand, opponents say it would add  the burden of an increased sales tax on people least able to afford it.

The outcome is far from straightforward. 

Sarah Narkiewicz, director of the Low Income Taxpayer Clinic at Washington University in St. Louis, said that while there is some merit to the plan, change inevitably brings some downsides.

“The idea is that by reducing the income tax, you’re going to bring in industry, you’re going to increase jobs, people are going to have more economic spending power,” Narkiewicz said. “The downside in this case is that in order to eliminate the revenue from the state income tax, which is about 60% to 70% of the state’s general revenue budget, we have to come up with that money from somewhere else, or we have to drastically cut services, or both.”

A boost to economic growth

Many of the arguments for the proposal center around boosting economic growth and making sure Missouri stays competitive.

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Advocates have pointed to the success of the nine states without an income tax as reasons for Missouri to consider this path and as models on how to do so responsibly. Those states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Washington does impose capital gains taxes on those that earn more than $1 million a year.

In 2024, Missouri ranked 36th in the nation for state gross domestic product per capita, according to Statista. All nine states without an income tax ranked higher.

Since 2010, Missouri’s net population has increased by 0.31%, Pew research found. The states without an income tax had a net population increase greater than Missouri’s.

Proponents are confident that the proposed plan will not throw off the state’s budget because it uses revenue triggers to implement income tax cuts. 

“That phased approach has worked very well in preventing shortfalls through the cuts,” said state Sen. Curtis Trent, a Republican representing Barton, Dade, Greene and Webster counties who is the bill handler on the Senate side.

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“Of course, this is a replacement policy, and so there are guardrails we think are sufficient to make sure there’s no drop in the budget, because that’s certainly not the intent.”

The bill only authorizes the legislature to make changes to the sales tax and does not directly affect it yet. 

Sen. Ben Brown, a Republican representing Franklin, Gasconade, Osage and Warren counties, said that if the proposals were the only pieces of legislation to pass, the rate would likely continue to tick down on its own with current revenue growth.

The added language allowing for sales tax adjustments could helps speed up the income tax elimination process and simplify the tax code by reconsidering exemptions, said Elias Tsapelas, the director of state budget and fiscal policy at the libertarian Show-Me Institute. The institute testified in favor of the legislation.

“If the legislature wants to do it faster, modernizing the state’s sales tax base is going to be something that speeds it up,” Tsapelas said.

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There are multiple ways in which that can be done.

One way is by expanding the base of what can be taxed. One example would be taxing subscriptions on digital services since their prevalence in consumer spending has grown significantly.

“For instance, I’m looking at a document I have up in Microsoft Word,” Tsapelas said. “Ten years ago, we might have went and purchased a disc of Microsoft Word, and I would have paid the sales tax on it. Now, I get it from Microsoft, and it’s technically software as a service, so I don’t pay sales tax on it.”

Another option is raising the sales tax rate on the goods and services already being taxed. It is estimated that the state sales tax rate would have to be raised to somewhere between 12% and 15% if the base is not expanded at all. 

Legislators have said that is unlikely that will be the case. Brown told The Beacon he didn’t believe the assumption that the sales tax rate would increase significantly would come true. Trent, in an interview with Missouri Independent, said the highest rate voters would accept is about 6%.

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The end result would likely be a mix of rate increases and an expansion of the base.

Brown acknowledged that it would be up to future legislators to withstand requests for industry-specific exemptions in order for any sales tax changes to succeed as intended.

“Financial situations can vary from year to year, and that’s something that’s going to take a great amount of agreement and compromise on. … And I think the only way it happens is if the legislature as a whole can stay very disciplined as to keep that sales tax rate either below where it is now or somewhere relatively close to where it is now.”

‘An odd duck’

Missouri is in a unique position compared to other states that have eliminated their income tax.

“I don’t think there are any states that have completely gone from a system where income tax is the primary source of revenue to eliminating the income tax, at least not in a very, very long time,” Narkiewicz said. “Tennessee just eliminated it, but it was a very small percentage. It wasn’t a true income tax. We’re kind of in a brave new world, and it’ll be interesting.”

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Tennessee has often been referenced as the state most similar to Missouri in terms of economic makeup.

Income tax made up about 2% of Tennessee’s revenue when it began eliminating its income tax in 2016, largely because it had never taxed earned income and instead only taxed interest and dividends.

In comparison, income tax makes up roughly 65% of Missouri’s state revenue. The state has already forecast lower revenue for future fiscal years while debating the budget.

States that have eliminated the state income tax also have other industries like natural resources, gambling and tourism that make up the bulk of revenue. 

“The argument … is that if Missouri cuts this income tax, we’ll be just like these other states and be economically successful,” Narkiewicz said. “We’re a little bit of an odd duck there. We don’t have a lot of the advantages that these other states have.”

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Eliminating state income tax typically comes with tradeoffs in other areas, Narkiewicz said, with one being in the form of higher sales taxes. Tennessee has the second-highest combined state and local sales tax rate in the country, according to the Tax Foundation. Missouri ranks 12th.

Wesley Tharpe, the senior adviser for state tax policy at the Center on Budget and Policy Priorities, said forgoing the income tax revenue also means less money for things like education, affordable housing and transportation.

Those factors can come back to bite states when a business considers the totality of what a state has to offer before moving there.

“The track record of other states is that both individuals and businesses and investors are not looking narrowly at one specific attribute when they’re thinking about where to live or to work or to start a business,” Tharpe said. “They’re going to be looking at the whole package of what a state offers. Taxes are certainly going to be one thing that any rational person or a company takes into consideration, but they’re also going to be thinking about the local quality of life.”

Some business lobbying groups have stepped forward in opposition, saying Missouri is already an attractive place to do business and the proposal doesn’t protect businesses from paying sales taxes on materials used for goods that would also be subject to sales tax.

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Missouri is not the only state contemplating income tax eliminations either, meaning it could become a race to the bottom with other states.

“If every state cuts down their income tax, then what does Missouri have to offer that is going to make it stand out in terms of the actual cost for eliminating state income tax and potentially expanding the sales tax base?” Narkiewicz said.

The proposal still faces several key votes and the ballot box before the impacts materialize. It will be heard next on Monday by the Senate Committee for Fiscal Oversight, where it will need approval before heading to the full Senate floor.

Type of Story: Explainer

Provides context or background, definition and detail on a specific topic.

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Missouri

UPDATE: Well-known mid-Missouri attorney charged after sting expected to request home detention | 93.9 The Eagle

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UPDATE: Well-known mid-Missouri attorney charged after sting expected to request home detention | 93.9 The Eagle


A prominent mid-Misssouri attorney has pleaded NOT guilty to a felony charge of enticement or attempted enticement of a child.

56-year-old Daniel Walter Follett is charged in Boone County Circuit Court. He had served as the Missouri Department of Revenue’s (DOR) general counsel until he was fired after last week’s arrest.

Court documents filed by Boone County prosecutors say Follett was allegedly using a prostitution website “to solicit sexual services from a person whom he believed to be a 16-year-old child.” The Boone County Sheriff’s Department’s probable cause statement says Follett allegedly arrived at an address in Boone County last week to pay money to have sex with a female whom he believed was under the age of 17.

56-year-old Daniel Follett of Columbia is currently jailed without bond (June 2026 mug shot courtesy of the Boone County Sheriff Department’s website)

Follett, who is currently jailed without bond, is scheduled to appear in court Tuesday afternoon before Judge Kimberly Shaw and is expected to request home detention, based on online court records.

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939 the Eagle News contacted the Missouri Department of Revenue (DOR) after Follett’s arrest. DOR released a statement about Follett’s arrest and status last week. It reads: “The Department is aware of an out-of-office incident involving a staff member who was arrested and charged with criminal activity. Following departmental procedures, employment has been terminated with the individual.”

What’s next: Follett is scheduled to appear in Boone County Circuit Court on Tuesday at 1 pm for a bond hearing before Judge Kimberly Shaw. Follett is represented by defense attorney Jessica Caldera, a former Boone County assistant prosecutor. Follett is expected to request home detention from the court until his trial. Boone County prosecutors have described Follett in a court filing as a flight risk.



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Missouri parent groups organize with school funding concerns

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Missouri parent groups organize with school funding concerns


Sarah Laub tried everything to get her son with learning disabilities a better education.

She drove him to a private school an hour and a half away from their home in rural Missouri before being directed to the local public school. When he continued to struggle, she tried homeschooling.

The local school district in Stockton, a town with a population under 2,000, just couldn’t provide everything her son needed, despite teachers’ best efforts.

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“They really did not have the funds to provide him with everything he needed, and he really, really struggled,” Laub told The Independent.

As her son approached high school, she researched schools near Kansas City and decided to move her family to Blue Springs, a growing suburb with 20 schools awarded a National Blue Ribbon by the U.S. Department of Education. There, her son learned to enjoy his education and immerse himself in activities like theater.

“Seeing the difference that funding made and the difference in resources that a rural school versus a suburban school had was so infuriating,” Laub said. “All kids deserve to have access to those resources.”

For years, she fought for her son to get what he needed, but now she’s bringing her anger to a larger fight — one she believes has vast implications for public schools statewide.

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Laub is part of a coalition called Parents for Missouri Public Schools that is organizing families against a proposed constitutional amendment that would allow state lawmakers to raise sales and use taxes in order to repeal the state’s income tax. Fueled by parents worried about the future of their kids’ schools, the organization is one of many groups labeling Amendment 5 an affront to public education.

The fight over Amendment 5 has largely been framed as a tax debate, with those in favor of the proposal pitching it as a way to drive more business to Missouri. But for public school advocates, the central question is what happens to classrooms if the state phases out a tax that supplies a major share of general revenue and replaces it with sales taxes under the purview of the state legislature.

“Amendment 5 could dramatically harm the bottom line of public education funding in a time in which public schools cannot take another hit,” Molly Fleming, a professional organizer behind Parents for Missouri Public Schools, told The Independent.

State funding of public schools came up $138 million short this fiscal year due to the state budget’s overreliance on lottery and gaming taxes, reducing the amount of per-pupil funding by a couple hundred dollars. The discrepancy has a disproportionate effect on schools who rely more heavily on state support, which tend to be Missouri’s rural districts.

The budget lawmakers passed this spring, which has yet to be signed by Gov. Mike Kehoe, keeps funding flat, coming $190 million under what the state’s formula for determining aid to public schools called for. And officials are predicting lean years ahead as the state reserves dwindle.

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“The cut to public-school funding was a very serious thing for me to want to be able to get involved,” Sierra Kilpatrick, a mother of five in North Kansas City and regional organizer with Parents for Missouri Public Schools, told The Independent. “I need to do something, so I don’t feel helpless. I can go out and talk about this.”

Supporters of Amendment 5 argue Missouri should move away from taxing income and toward a system they say would make the state more competitive, attract investment and let residents keep more of what they earn. They have framed the proposal as a way to force lawmakers to modernize the tax code while giving them flexibility to replace lost revenue.

“Other states with no income tax have grown at a pace much faster than Missouri,” Gov. Mike Kehoe said in a recent radio interview. “We’re losing population, they’re gaining population. That isn’t sustainable.”

But opponents say the measure asks voters to trust lawmakers to replace the state’s largest revenue source without guaranteeing that public schools will be protected if the math does not work.

A woman at a pro-Amendment 5 town hall in Grandview earlier this month asked if public schools would face additional cuts, saying she worried lawmakers might not prioritize stable education funding if given more control over taxation.

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Republican state Rep. Bishop Davidson of Republic, who sponsored the tax cut amendment, said he thinks public education would benefit from revenues being tied to consumption rather than income.

“States that rely on consumption taxes rather than income tax revenue have more stable budgets and more predictable budgets,” he said.

Davidson’s claim is largely true, with research showing that income tax revenues decline faster in a recession than sales taxes. But policy analysts have varying recommendations to fight volatility, advising states to plan ahead with large reserves or diversify its tax portfolio by not leaning too heavily on one tax system.

Amendment 5 calls for local governments to cut tax rates to keep revenue neutral, since it assumes more goods and services will be subject to both state and local sales tax. It includes a provision barring municipalities from lowering local funding of public schools under these clawbacks, but it does not prescribe any protections at the state level.

The Missouri Budget Project, a left-leaning public policy think tank opposing Amendment 5, estimates that the change could cut school budgets by 18%.

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“It really does feel like a tax break for billionaires and millionaires versus safeguarding funding for public schools,” Fleming said. “There are a lot of parents who also are worried about their own bottom line, or worried about increased gas taxes, or whatever it may be.”

Fleming has an extensive background in organizing work, including the formation of a group called Parents for KC Kids which advocated for the passage of Kansas City Public Schools’ bond measure last year. Voters widely approved the $474 million bond, the first capital improvement bond to pass in the city since the 1960s.

Around 90% of those involved in Parents for KC Kids had never campaigned before, Fleming said. The group raised just over $11,000, according to Missouri Ethics Commission filings, contributing to a decisive victory through volunteer efforts and word of mouth.

The families who got involved in the campaign kept their advocacy work going, helping lay the foundation for Parents for Missouri Public Schools.

“When the bond passed, it was like a trigger went off in everyone’s head that, oh my gosh, we can do important things,” said LaNeé Bridewell, a mom in the district. “It is kind of like a bug. We got bit by the bug, and that first one gave us momentum and clarity about our ability to make change.”

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Kathryn Evans, a Kansas City mom and nonprofit consultant, was used to helping charitable organizations advocate for themselves but hadn’t yet gotten involved in school matters apart from the parent teacher association. She joined the bond fight to help secure better facilities for neighborhood schools. But after the win, she hasn’t stopped seeing needs.

“Once we won that campaign, I became more aware that there are a lot of threats,” she told The Independent. “We just won a lot of money for our schools so that we can have nicer buildings and facilities, but there are plenty of threats to public education fundamentally.”

Across the state, parents in the Francis Howell School District in St. Charles County took on a similar battle this year.

In April, the county voted on a proposed property tax freeze, which would have stalled local revenue that public schools rely on, with 59% of voters rejecting the measure. The proposal was part of a bill passed by state lawmakers last year that also sought to incentivize sports teams to stay in Missouri.

Jamie Martin, who is president of a group called Francis Howell Forward, partnered with Fleming to educate her neighbors on why frozen property tax rates could harm local schools.

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“Because of the property tax fight, I had learned a lot about taxes and how they’re divided up and how they work and how they fund schools,” Martin told The Independent. “So when I saw Amendment Five come on the horizon, I was like, ‘Oh, that is going to have major impacts for public schools,’ and public schools are something I care a lot about.”

Earlier this month, Martin led a training for parents in St. Charles to learn about Amendment 5. Her profession as an education researcher has put her at the front of countless training sessions, but the energy in this room stood out.

“These parents are ready, not just to hear the information and to complain, but these parents are ready to act,” she said.

Over the past few weeks, volunteers with Parents for Missouri Public Schools have held regional meetings in community centers, homes and restaurants. They ask attendees to spread information in a way that fits their schedule, whether it be in social media posts, play dates or more formal campaigning by flyering or making calls.

“The goal is to educate people on this so that they can go out into their communities and educate more people by word of mouth,” Kilpatrick said.

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Although summer schedules are busy, Evans said, volunteers are finding ways to work advocacy into their schedules, motivated by the hope of helping their kids’ education.

“We as parents have the highest stakes, but we also have a lot of agency to make a difference in the outcome because of our relationships with each other,” she said. “We are going to be connected as a parent community because we all care about our kids.”

The coalition is also working to influence school boards to pass resolutions warning about potential impacts of Amendment 5. In the past week, school boards in Lee’s Summit and Kansas City have adopted such statements.

Parents for Missouri Public Schools has not taken a partisan stance, instead focusing on the impact to school funding and parents’ personal budgets.

“We are not affiliated in any way with any party,” Evans said. “There is a shared interest in protecting public schools, and that spans all kinds of differences.”

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So far, the group has reported one contribution large enough to trigger 48-hour disclosure requirements: a $10,000 contribution from St. Louis-based Missouri Wins Investor Network. Smaller donations will be included in the committee’s July 15 report.

“It is pretty rare that we have an opportunity in Missouri to bring people together across such broad differences to all walk together towards something that we want to protect,” Evans said. “In this case, it is protecting public schools, protecting everyday Missourians.”



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Children receive custom playhouses at Habitat for Humanity’s first-ever playhouse build event

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Children receive custom playhouses at Habitat for Humanity’s first-ever playhouse build event


Children in the Jefferson City area received custom-built playhouses Saturday during River City Habitat for Humanity’s first Playhouse Build event at Capital Mall.

Local businesses, volunteers and community organizations spent the day assembling and decorating the playhouses. Each playhouse was designed around a child’s favorite colors, hobbies and interests.

The children and their families were presented with the finished playhouses at the end of the event.

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River City Habitat for Humanity said the event was created to give children a special place to imagine and play while bringing the community together in support of the organization’s mission.

“A playhouse may seem like a simple structure, but to a child it’s a castle, a clubhouse, a fort, or a place where their imagination can come to life,” Susan Cook, the executive director of River City Habitat for Humanity, said in a news release. “We hope this becomes a tradition that our community looks forward to each year.”

Nine teams participated in the inaugural event, including Hitachi, Samco Business Products, Jefferson City Medical Group, the Home Builders Association, Capital City Business Builders BNI, Jefferson City Parks, Habitat Women Build and community volunteer teams.

Hitachi served as the event’s presenting sponsor.

“Our team was super excited about sponsoring it because we are giving back to the community and we are giving back to little people,” Leanna Ritter, a Hitachi Energy employee, said. “What’s better than little people?”

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Scruggs Lumber donated the plywood used to build the playhouses, and Sherwin-Williams donated the paint.

River City Habitat for Humanity has partnered with local families, volunteers, businesses and community organizations since 1993. The nonprofit says it has helped build more than 138 affordable homes in the Jefferson City area.



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