Missouri Legislature Puts Income Tax Elimination on 2026 Ballot

JEFFERSON CITY, Mo. — Missouri voters will decide later this year whether to fundamentally reshape the state's tax structure, after the General Assembly in April 2026 passed a proposed constitutional amendment to eliminate the individual income tax and replace it with a broadly expanded sales tax. The measure, a landmark proposal making Missouri the first state where the legislature has put the direct question of eliminating the income tax to a popular vote, now awaits a decision from Governor Mike Kehoe. The governor has until May 22 to determine whether the amendment will appear on the August 4 primary ballot or the November 3 general election ballot. If approved by voters, the amendment would direct the state legislature to phase out and ultimately eliminate Missouri's individual income tax through gradual reductions tied to state revenue growth. Currently, Missouri has a graduated income tax with a top rate of 4.7%. To compensate for the estimated $300 billion in lost revenue, the proposal grants lawmakers new authority for a period of five years. Specifically, the legislature would be empowered to impose the state sales tax on “any goods and services” it chooses. This provision would override a 2016 constitutional ban that prevents lawmakers from expanding the sales tax base without voter approval. Under the new proposal, the legislature could decide which new sales to tax without needing another vote from the public for five years. The state’s current sales tax is 4.225%, but local levies bring the average combined rate to 8.41%, according to the Tax Foundation. Expanding the base could mean applying this tax to a vast array of services not currently taxed, such as professional services, website design, personal fitness training, and repairs. Critics have pointed to the measure's ballot language, which asks voters whether to “modify” the sales tax, a term they argue intentionally avoids the more direct words “increase” or “expand.” This phrasing, opponents say, could obscure the full financial impact from voters who may not realize they are authorizing a significant sales tax expansion. Proponents, including Republican Floor Leader Sen. Tony Luetkemeyer, have championed the plan as a necessary step to make the state more economically competitive. “Missouri needs tax reform to retain and attract small businesses, to keep families here in Missouri and to grow our economy,” Luetkemeyer said. He described the potential elimination of the state income tax as “the largest middle-class tax cut in the state’s history.” However, opponents argue the tax shift would disproportionately benefit the wealthy while increasing the burden on low- and middle-income families. An analysis by the nonprofit Institute on Taxation and Economic Policy estimated that a Missouri family earning between $49,000 and $78,000 annually would pay an average of $535 more in taxes under the new system. “Pretty clearly, this is going to be a tax increase for most people,” said Carl Davis, the institute’s research director. Claire Cook-Callen, executive director of the progressive group Progress Missouri, echoed this concern, stating the plan “gives a tax break to the state’s eight billionaires and sticks each working family with a bill of about $500 more each year.” Democratic Minority Leader Rep. Ashley Aune has also expressed her hope that voters will reject the measure. While other states have pursued income tax reductions, Missouri’s approach is unique. A 2022 Kentucky law established revenue-based triggers for potential income tax cuts, but each reduction still requires legislative approval. Similarly, a Mississippi law is gradually lowering its income tax rate with benchmarks that could eventually eliminate it over more than a decade. Missouri’s proposal is the first to put the entire question of elimination directly before the electorate in a single vote. For Missouri business owners, the proposal introduces significant complexity and uncertainty. While eliminating the individual income tax would directly benefit owners of pass-through entities like S-corporations and LLCs on their personal returns, the corresponding expansion of the sales tax base creates a host of new operational challenges. Businesses in service industries that have never had to collect or remit sales tax could suddenly be faced with a substantial new compliance burden. The five-year window for the legislature to add new taxable services means the rules could change annually, making long-term financial planning difficult. Our experience shows that navigating major state tax overhauls requires careful strategic planning to manage new liabilities and compliance systems. This is precisely the kind of situation where expert guidance on tax preparation and compliance becomes critical for businesses to adapt without disrupting operations. For assistance navigating these potential changes, business owners can contact C&S Finance Group LLC at csfinancegroup.com. With the governor's decision on ballot placement due by May 22, the focus will soon shift to the public campaigns for and against the amendment. The outcome of the vote in either August or November will not only determine the future of Missouri's fiscal policy but could also serve as a bellwether for other states contemplating similar dramatic shifts in their tax codes.