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Missouri House Speaker Jon Patterson, R-Lee’s Summit, presents his proposal for a statewide vote on eliminating the income tax Wednesday to the House Commerce Committee (Rudi Keller\/Missouri Independent).<\/p>\n
During Wednesday\u2019s hearing on Gov. Mike Kehoe\u2019s plan to replace Missouri\u2019s individual income tax with an expanded sales tax, the key word was trust.<\/span><\/p>\n The <\/span>proposed constitutional amendment<\/span><\/a> giving the legislature three years to overhaul state tax policies is open-ended \u2014- it allows lawmakers to impose sales tax on any financial transaction exchanging goods or services.<\/span><\/p>\n In his <\/span>State of the State address<\/span><\/a>, the only parts of the economy Kehoe put off-limits was agriculture, health care and real estate. And as he presented the proposal to the House Commerce Committee, House Speaker Jon Patterson said everything else was up to lawmakers.<\/span><\/p>\n The state\u2019s revenue needs will be protected by revenue triggers \u2014 at levels unstated in the proposed amendment \u2014 as the individual income tax is reduced and finally eliminated, Patterson said.<\/span><\/p>\n \u201cIt will be up to you to decide what trigger do we want, and make sure that it\u2019s done in a responsible way, so that we don\u2019t have things that have happened in other states,\u201d Patterson said.<\/span><\/p>\n \u201cSo we\u2019re asking the people to trust the legislature to raise their sales tax, to raise any other taxes that they see fit and to trust politicians to make those responsible decisions,\u201d said state Rep. Nick Kimble, a Kansas City Democrat.\u00a0<\/span><\/p>\n \u201cWell, not any more than they trust you now,\u201d Patterson said, triggering a round of laughter in the packed committee room.<\/span><\/p>\n The proposal, as written, puts nothing off limits. It includes a three-year exemption to the Missouri Constitution\u2019s requirements that tax increases <\/span>win voter approval<\/span><\/a> and that any tax \u201cupon or measured by fuel used for propelling highway motor vehicles\u201d be <\/span>earmarked for road needs<\/span><\/a>.<\/span><\/p>\n Patterson\u2019s proposal seeks to end the personal income tax as early as Jan. 1, 2031. Income taxes on businesses and trusts would continue.<\/span><\/p>\n The committee did not vote on Wednesday. The next regularly scheduled meeting is next Wednesday and a vote could be held at that time.<\/span><\/p>\n If the measure is approved in both the House and Senate, it could be on a ballot as early as August.<\/span><\/p>\n The push to replace Missouri\u2019s individual income tax is an effort to modernize the state\u2019s tax structure, Patterson said. The individual income tax was first enacted in 1917 and a sales tax began in 1937.<\/span><\/p>\n The income tax is a drag on the state\u2019s economy compared to states that have no personal income tax, he said. And the sales tax, which mainly applies to physical goods, is outdated because services, such as online streaming services, are exempt, he added.<\/span><\/p>\n \u201cThis is the first step in a long, methodical process that will take place if the citizens so choose to modernize our tax system and give people fairness in the tax system that we have,\u201d Patterson said.<\/span><\/p>\n To bolster his arguments, proponents brought Aaron Hedlund, chief economist at White House Council of Economic Advisers, and Grover Norquist, founder of Americans for Tax Reform.<\/span><\/p>\n Hedlund is a former University of Missouri professor who now teaches at Purdue University.\u00a0<\/span><\/p>\n About 25 years ago, Hedlund said, Missouri generated about 2% of the U.S. economy, while the share now is 1.5%.<\/span><\/p>\n \u201cI\u2019m sick of Missouri losing,\u201d he said. \u201cFor 25 years, we\u2019ve oftentimes been in the bottom 10 of economic growth. Prior to the income tax reductions that started about a decade ago, we were oftentimes in the bottom five at economic growth. People are voting with their feet, and they\u2019re not choosing Missouri.\u201d<\/span><\/p>\n Democratic members of the committee were skeptical of whether the tax proposal was the way to solve that problem. House Minority Leader Ashley Aune, a Kansas City Democrat, noted that Republicans have dominated Missouri politics for the past 25 years.<\/span><\/p>\n The GOP has controlled the state Senate since 2001, the Missouri House since 2003 and held the governor\u2019s office for 14 of the past 26 years.<\/span><\/p>\n \u201cI want to make the point that what we have been doing is not working,\u201d Aune said. \u201cI would posit that this is not the solution.\u201d<\/span><\/p>\n Missouri\u2019s personal income tax is almost flat, with a top rate of 4.7% on taxable incomes <\/span>greater than $9,436<\/span><\/a>. There are significant exemptions from the tax, including <\/span>all Social Security payments<\/span><\/a>, a share of retirement income and <\/span>capital gains<\/span><\/a>, which is profits from the sale of property or other assets.<\/span><\/p>\n The income tax generates about 65% of the state\u2019s annual general revenue receipts, which were $13.4 billion in the year that ended June 30.<\/span><\/p>\n Sales tax is more complicated because local governments have a variety of levies they can put on the ballot. The basic state rate is 4.225%, with 3% dedicated to general revenue and the rest earmarked for public schools, conservation, state parks and soil conservation.<\/span><\/p>\n There are <\/span>more than 50 locations<\/span><\/a> in the state where the total sales tax is 11% or higher after adding local option taxes.<\/span><\/p>\n Matching the current revenue from the individual income tax without expanding the transactions that are taxed would require raising the sales tax to nearly 13%. .<\/span><\/p>\n One of the main focuses of testimony during Wednesday\u2019s hearing was who would bear the greatest burden under an expanded sales tax. Opponents of the measure said wealthier Missourians would see their taxes decrease substantially while people of limited means will pay more in taxes.<\/span><\/p>\n After deductions, a married couple with a total income of about $36,000 pays no state income tax. The sales tax, however, would hit every purchase they make, opponents said.<\/span><\/p>\n Figures from the left-leaning Institute on Taxation and Economic Policy show that people in the lowest 20% of income pay about one-third more of their income in sales and other taxes in Tennessee, Texas and Florida than the same group in Missouri, said Jeremy LaFaver, a lobbyist for the Missouri Budget Project.<\/span><\/p>\n The top 1% of income earners in Missouri pay 5.7%, he said, while the same group in Florida pays 2.7%.<\/span><\/p>\n \u201cThey rely largely on consumer based taxes that impact low income, fixed income people,\u201d LaFaver said.\u00a0<\/span><\/p>\n For one lawmaker, reducing the burden on high-income earners is a benefit of the plan.<\/span><\/p>\n Wealthy individuals run the businesses that employ Missourians, said state Rep. Brian Seitz, a Republican from Branson.<\/span><\/p>\n \u201cThe wealthy pay way more in taxes,\u201d he said. \u201cThe percentage may look smaller, but they actually paid quite a bit more, and they are the foundation of our state\u2019s tax base.\u201d<\/span><\/p>\n Dennis Ganahl, founder of Mo Tax Relief Now, said the transactions that would be taxed are those used by wealthier people.<\/span><\/p>\n \u201cThe people with the lower incomes are just buying goods,\u201d Granahl said. \u201cThey aren\u2019t buying CPAs or masseuses or dog walkers or hair stylists or pedicurists or manicurists. All those are services that are used by wealthier people.\u201d<\/span><\/p>\n Lower income Missourians use services that would be taxed, Aune responded.<\/span><\/p>\n \u201cThat is one of the wildest things I\u2019ve heard in this building, if I\u2019m being honest,\u201d she said. \u201cAnd I\u2019ve heard some crazy stuff.\u201d<\/span><\/p>\n The Missouri Constitution currently bans sales taxes on <\/span>real estate transactions<\/span><\/a> and any <\/span>transactions not currently taxed<\/span><\/a>. Both were added to the constitution after initiative petition campaigns organized by the Missouri Association of Realtors.<\/span><\/p>\n The campaigns cost $4.3 million to protect real estate sales from taxation in 2010 and $5.6 million to add protections against sales taxes on services.<\/span><\/p>\n Jason Zamkus, a lobbyist for the realtors, reminded the committee in his testimony that voters approved both measures by wide margins. Kehoe\u2019s statements that he wants to exempt real estate are not included in the proposal, he noted.<\/span><\/p>\n \u201cWhile we appreciate the governor\u2019s statement in the State of the State that it\u2019s his intent not to impact the real estate industry, unfortunately, the proposals that are pending before you currently are silent on that issue,\u201d Zamkus said.\u00a0<\/span><\/p>\n The Realtors could be one of the most important opposition groups if the measure doesn\u2019t include the protections for real estate sales.\u00a0<\/span><\/p>\n \u201c<\/span>If we were willing to spend that much a decade ago,\u201d he said after testifying, \u201cwe are certainly going to fight to protect it.\u201d<\/span><\/p>","protected":false},"excerpt":{"rendered":" Missouri House Speaker Jon Patterson, R-Lee’s Summit, presents his proposal for a statewide vote on eliminating the income tax Wednesday to the House Commerce Committee (Rudi Keller\/Missouri Independent). During Wednesday\u2019s hearing on Gov. Mike Kehoe\u2019s plan to replace Missouri\u2019s individual income tax with an expanded sales tax, the key word was trust. The proposed constitutional…<\/p>\n","protected":false},"author":2,"featured_media":8581,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8580","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"\n![\"\"](\"https:\/\/missouriindependent.com\/wp-content\/uploads\/2026\/01\/Aune-taxes-20260128-300x200.jpeg\")