Some retired Missourians push back against Amendment 5 ahead of August election

COLUMBIA, Mo. (KMIZ)

A majority "yes" vote on Amendment 5 on Aug. 4 would allow lawmakers to lower and eliminate the state income tax over time, but for people on fixed incomes, it could mean tightening their budgets.

"During the legislative session, I looked a it and thought this is going to be bad for Missouri retirees. There's just no question," AARP's advocacy director Jay Hardenbrook said.

Lawmakers have suggested expanding what sales tax applies to, including services, and raising the sales rate, which could mean Missourians pay more at the register. Hardenbrook said retirees typically have to pay for more things after retiring.

Currently, Social Security is exempt from income tax, along with many public pension benefits and some private pensions, Hardenbrook said. Capital gains are also exempt from income tax.

"The vast majority of retirees in the state of Missouri pay little or no personal income tax in the state, so they won't see really any benefit from that being eliminated," Hardenbrook said.

State Rep. Bishop Davidson (R-Republic) said how the income tax is eliminated comes down to four factors: Timeline, sales tax base, sales tax rate and the state revenue.

"The Constitutional framework of Amendment 5 creates a predictable place for us to operate within, and so it's just about kind of tinkering with all of those numbers," Davidson said.

He was the bill sponsor of HJR 173 and 174, the law behind Amendment 5, which was passed in the spring.

Davidson claims passing Amendment 5 would close loopholes in the current law that restrict what can be included in sales tax. By expanding the sales tax base to include services, it could keep sales tax down while still phasing out income tax.

"If we could only get rid of those loopholes, we could literally eliminate the income tax and lower sales taxes at the exact same time," Davidson said.

Research director at the Missouri Budget Project Lindsey Baker said if lawmakers rely solely on increasing sales tax, it could jump from 3% to 10.7%. Sales tax could be even higher than that when combined with local sales tax, and the sales tax rate could go from 8% to 16%.

"In order to fully replace the income tax lawmakers would need to dramatically increase the sales tax rate, greatly expand the sales tax base (what is taxed) which would increase net taxes by over $500 for the average Missourian," Baker said.

Davidson said some things are exempt by law, like real estate, healthcare, groceries, gasoline and nonprofits. Those exemptions aren't written into the law.

The law also doesn't have a timeline, which Davidson said would give lawmakers more flexibility, but he's hoping for it to be phased out between 2032 and 2036. Those details would be determined by the 2027 legislators, and Davidson said it's likely that the construction of the following laws would be outsourced to "other people to figure out what the best policy would be for our state."

Previous reporting shows many people are hesitant to back the amendment, mostly because there isn't a solid plan. Davidson said he talks to Missourians during town halls on the ballot measure, and many people come in hesitant but leave feeling confident.

"I think there's a lot of skepticism coming into the town hall," he said. "If that room would vote [on the measure], it would pass."