Missouri senators prefile tax reform bills that include establishing flat tax, eliminating income tax

COLUMBIA, Mo. (KMIZ)

Income tax changes may be on the table during the 2025 session after six Missouri senators prefiled bills that propose setting a flat tax for the state to ultimately eliminate income tax.

Missouri currently has a tax rate of 0.5% for every $1,273 of annual taxable income. This rate caps out at a top rate of 4.8% for annual incomes of $8,911 or greater.

Multiple bills have been filed.

SB151 aims to create a flat tax of 4% for Missourians before creating reductions until income tax is phased out in the state. If passed, it would go into effect in 2026.

A filing from Sen. Curtis Trent (R-Barton County) aims to ask voters to approve a Constitutional Amendment that would create a spending limit each year for the state that is based on the state’s population and establish the “Tax Reform Fund.”

Reductions in SB151 are contingent on the Constitutional Amendment passing. The bill would also eliminate a state tax deduction for portion of federal income taxes that are paid by the taxpayer.

“The reductions shall be equal to 0.1% when the balance in the Tax Reform Fund reaches $120 million, with an additional 0.05% reduction for each $60 million in excess of the $120 million minimum balance,” SB151 says.

Income tax traditionally funds public education, law enforcement and government operations, with government operations being the main point of contention for those in favor of eliminating the income tax.

Americans for Prosperity is a group very that supports the change. According to state director Gary Hollis, when door knocking during the past election cycle, residents appeared to want tax reform.

"Right now, Missouri families have 5% of their income going to Jefferson City. And this is going to return their money back to them to spend on the things that they want to help their family," Hollis said.

According to University of Missouri economics professor Joseph Haslag, for both those in favor and opposed to abolishing income tax, this topic is very complicated and not an easy change to make.

"Now, roughly 65% of the [state] revenues are collected from the individual income tax in this state, so replacing it completely would be a big chore," Haslag said.

Nine states in the country have no income tax, with varying ways of supplementing the loss.

States like Florida and Nevada lean on revenue from tourism while Washington and New Hampshire tax specific forms of income. Most if not all the states tend to raise property and sales tax.

One of the prefilings -- SJR22 -- is a Constitutional Amendment that plans to expand sales taxes with plans of opening the door to possibly adding a service tax to currently untaxed services. Language in that bill is also included in SJR20.

Some business are opposed to this change, arguing that an increased service tax may turn customers away.

Owner of the salon Studio 306 West Marina Bahls moved to Columbia from Las Vegas, Nevada, which has minimal service taxes. Bahls said while living in Nevada, there was never an issue with the lack of income tax with the state focusing on sales tax increases. Bahls adds she was disappointed about this possible addition of service taxes.

"Customers love my service, but of course, not everybody can afford to pay extra money," Bahls said, "I think that this is going to affect some points of our business."

Chief Lobbyist for Missouri Realtors Sam Licklider argues that a service tax may harm lower-income families as the increased tax will hit them harder than higher-income spenders who can take the extra fees.

"They're spending on housing, spending on food but that's not going to be taxed, I suspect," Licklider said. "Everything else, they're going to get hit and hit bad at the paycheck to paycheck."

The first Missouri Senate session will start Jan. 8.