My column last month shared my personal concerns about Amendment 5 on the August ballot in Missouri. As I mentioned in the column, I planned to have a conversation with my Board, and at the Truman Heartland Community Foundation Board meeting in June, the Board voted to adopt an official position opposing Amendment 5.

What is Amendment 5?

In case you are not familiar (or need a refresher), Amendment 5, if approved on August 4, would eliminate the state income tax and allow Missouri lawmakers to replace the lost revenue by raising sales taxes and levying new taxes on services. 

It enables the legislature for 5 years to bypass the Hancock Amendment’s requirement for a vote of the people for a tax increase. The legislature would need to not only raise the state sales tax rate but also greatly expand the range of goods currently taxed and institute use taxes on services to make up for the $8.5 billion per year produced by income tax (64% of the general revenue budget). 

What Would This mean for Public Services?

There could be new taxes on the sale of your home, agriculture, prescriptions, and services like day care, home and car repairs, doctors' visits, and health care, etc.

It seems certain this will create a budget deficit with a devastating impact on public education, health care providers, non-profits, and the people they serve in our community. In this year’s state budget, we have already seen painful cuts to critical services and a $190 million funding gap in the K-12 public education foundation formula. 

Amendment 5 would lead to even steeper cuts in the coming years. It reminds me of our neighbors' experience in Kansas, with a failed experiment that began in 2013. 

What Does this Mean for Missouri Residents?

The “Vote Yes for Amendment 5” group (Missouri Promise PAC) is already spending a lot of money on commercials that make unsubstantiated claims. One commercial claims it will save Missourians $3,200 in taxes. 

That may be true regarding the income tax; however, according to the Missouri Budget Project, a median-income Missourian household earning $65,400 per year would pay $535 more in net taxes as sales tax rates increase and services are taxed. 

The only group paying less is the top income earners. It’s simply a very regressive tax. One group that will be hit particularly hard is retirees. 

Currently, Social Security benefits and most public pensions (e.g., teachers) are not taxed by the state, so they have no state income tax savings. Retirees will end up paying much more in sales and service taxes for the goods and services they need for their daily lives. 

How this Relates to Data Centers

Another Yes vote commercial claims Amendment 5 will make data centers that are “making money from online pornography and gambling” pay their fair share. While this certainly appeals to many people concerned about data centers and AI, Amendment 5 contains nothing related to data centers or to raising the corporate income tax. So, this claim is misleading in my opinion.

Who Is Coming Out to Represent this Bill?

I have been in conversation with local chamber of commerce leaders about conducting a forum on Amendment 5 with someone speaking for each side.  It’s an issue that will dramatically impact local small businesses. 

One chamber has set a date, and we quickly identified someone to speak about why it’s bad for Missouri, but the challenge has been finding someone to come speak in favor of Amendment 5. We have not yet been able to find a panel speaker who is willing to speak in favor of it. 

Our Board Stands Opposed to Amendment 5

My assessment remains that Amendment 5 is not good for Missouri, and I am pleased that my Board of Directors also reached the same conclusion.  

Questions? Contact Phil Hanson.