Amendment 5 would end Missouri’s income tax, but could add sales taxes on services like haircuts

KSHB 41 reporter Charlie Keegan covers politics in Kansas, Missouri and at the local level. Share your story idea with Charlie.

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In three weeks voters in Missouri will decide whether to end the state’s income tax. A yes vote on Amendment 5 on the August 4 primary election will begin up to 10-year process phasing out of the state income tax.

To make up for the roughly $9 billion the income tax brings in, the state would have to add sales and use taxes on certain services.

Subscriptions like Netflix and professional services like barbers, veterinarians, HVAC, plumbing, and artificial intelligence would most likely see new taxes.

Supporters say the proposal gives Missourians more control over when to pay taxes, will attract businesses to the state, and modernizes the tax code to get rid of loopholes.

“The wealthy who are able to take advantage of all of the income tax loopholes,” pointed out Camellia Peterson of Americans for Prosperity - Missouri. "They're not paying sales tax on a lot of the services and luxury items that they use, so this really spreads that burden out more and gives working Missourians a break and more money in their own pockets.”

Charlie Keegan/KSHB

Peterson is traveling around Missouri this week hosting town halls about the topic. She doesn’t expect sales tax rates to increase and considers this approach as more stable for government.

Opponents believe the proposal will hurt the working class by adding more taxes to the items they regularly purchase and could result in state budget cuts effecting services.

Scott Charton of Protect Mo Taxpayers says the proposal will hurt seniors most because many don’t currently pay income tax on social security, but would have have to pay the expanded sales and use taxes.

“It's not a tax cut, it's a tax swap,” Charton said. “I call it the everything tax because it'll be just about everything.”

Charlie Keegan/KSHB

Davis Ramsey at Catalyst Barber Co in Kansas City doesn’t think a potential sales tax on haircuts will keep customers away. He sees pros and cons to changing the state’s tax policy to more of a consumption tax.

“I could see how someone could be negatively impacted versus someone who doesn’t pay for those sort of things and that would be a bonus to them,” Ramsey pointed out.

Chris Morrison/KSHB

Here’s the language voters will see on the ballot.

Shall the Missouri Constitution be amended to:

• Require legislative phase-out of the individual state income tax based on revenue growth, and authorize the expansion of sales and use taxes;
• Curtail constitutional limits on taxing goods and services; and
• Require local tax rate cuts without reducing school funding if local sales tax revenue increases?

The proposal has no direct impact on state or local tax revenue. If passed, implementing legislation will have an unknown impact to state and local tax revenue. If implemented, state government entities expect a reduction of $57,000 annually in income tax check-off donations and implementation costs of at least $100,000.

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