Appeals court rewrites Missouri income tax ballot language

COLUMBIA, Mo. (KMIZ)

The Missouri Western District Court of Appeals on Friday rewrote the language of a ballot measure that seeks to eliminate Missouri's income tax and expand sales taxes.

The court heard the case after a Cole County judge ruled against a challenge to the ballot measure on Monday.

The appeals court on Friday rejected a request to take the measure off the ballot, but stated in its order that the language needed work to be "fair and sufficient." The court stated in the decision that its rewrite cleared up that a "no" vote would still allow for future changes to the tax system.

The court also changed the ballot summary to note that the amendment would require local tax rate cuts without reducing school funding if sales tax revenue increases.

Amendment 5 would allow the state to phase out the current income tax, while increasing sales taxes to make up for the loss, and was a major priority of the Republican majority in Jefferson City this past legislative session. Gov. Mike Kehoe decided in May to put the measure on the August primary election ballot. Other ballot issues were certified last week.

Owens, in a lawsuit filed after the General Assembly approved the ballot measure in April, claimed the ballot measure dealt with too many subjects and that the ballot language was improperly written. A Cole County judge ruled against Owens on Monday, prompting the appeal.

Supporters tout economic growth, opponents warn of funding impacts

Lawmakers and political activists gathered Friday in Columbia to discuss the efforts to phase out Missouri's state income tax.

The event, hosted by Americans for Prosperity in partnership with MO Tax Relief Now, was held at the southside Shakespeare's Pizza location in Columbia and featured state Rep. John Martin (R-Boone County) and Rep. Bishop Davidson (R-Greene County).

Both lawmakers declined to comment on Friday's court ruling, saying they had not yet reviewed the decision.

Davidson sponsored House Joint Resolution 173 to eliminate the income tax and allow voters to decide the issue in August. The measure cleared the House by a 95-59 vote in April.

Supporters say eliminating the income tax would leave more money in the pockets of Missourians while making the state more attractive to businesses and economic investment.

"I think it's a good idea because it puts more money back into the pockets of Missourians," Davidson said. "But in addition to putting more money in the pockets of Missourians, it allows for our future Missourians, even those who are unborn right now to make more money in their future as well. Missouri has been dying as an economy for a long time."

Davidson also pushed back on concerns that the proposal would disproportionately impact lower- and middle-income residents.

"The big missing piece to that puzzle is that it supercharges the economic growth and economic opportunities in Missouri," Davidson said. "What I'd ask someone who is concerned about that is, would you rather someone make $20,000 and pay 0% tax or $25,000 and pay 5% tax? Really? At the end of the day, it's about take-home pay."

Martin said he supports the proposal because it shifts taxation away from income and toward consumption.

“I like it as a general concept from the standpoint of not taxing people, what they earn and on what they own. And so it moves us in that direction,” Martin said. “As a business owner, I want to be a part of a state that's growing.” 

If approved, Missouri would join nine states that do not levy a state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Davidson added that he did not have a preference on the governor's decision to place the measure on the August ballot rather than November, while Martin said he supported holding the vote in August.

"I did support the standpoint of let's get it in August," Martin said. "That way, hopefully the state will pass it and then it does give us, as lawmakers, time as far as throughout the fall to be looking at that and looking at the different changes that are coming."

MO Tax Relief Now argues Missouri's individual income tax currently generates roughly $8.5 billion annually, accounting for about 64% of the state's general revenue. The state's top individual income tax rate is currently 4.7%.

They also claim Missouri's proposal differs from a failed Kansas tax-cut experiment because the plan gradually phases out the income tax, ties reductions to replacement revenue, broadens the sales tax base and allows future adjustments. They also say a worker earning $60,000 annually could keep approximately $2,600 more each year under the proposal.

Critics, however, argue the proposal would shift more of the state's tax burden onto lower-income residents and could jeopardize funding for public services.

Outside Friday's event, Columbia resident Alice Turner was one of three protesters holding signs opposing Amendment 5.

"Getting rid of the income tax in Missouri would be horrible for our economy," Turner said. "Our schools, our medical facilities, libraries would all lose funding."

Turner also expressed concerns about future sales tax increases.

"They will have any amount they want to increase the sales tax," Turner said. "This is a tax that helps the wealthy and hurts the working Americans."

She also criticized the decision to place the measure on the August ballot.

"You don't realize what you're voting for," Turner said. "They also put it on the August ballot because typically, with kids not in school, on vacation, the turnout is lower. We really have to get people to the polls."

Some business groups have also voiced opposition because the proposal would expand sales taxes to services that are currently exempt, including medical visits and real estate transactions.

If approved by voters, the measure would represent Missouri's most significant income tax overhaul since 2014, when the state's top rate was reduced from 6% to 4.7%.