Today, I am sharing my personal concerns as the CEO of Truman Heartland Community Foundation regarding Amendment 5, which will be on the August Ballot in Missouri. 

This amendment encourages voters to eliminate the state income tax and allows Missouri lawmakers to replace the lost revenue by raising sales taxes and levying new taxes on services. 

This will shift us from a system in which higher-income taxpayers pay an equal percentage to one in which median-income people pay a higher percentage of their income in taxes. And I believe 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. 

The Missouri income tax generates $8.5 billion per year, which is 64% of the general revenue budget. The state portion of sales taxes is currently 3%, not including local sales taxes. With local taxes, the current sales tax rate can be 9% or even 10%. To replace the revenue, the state’s portion of sales taxes would need to increase to 10.7%. So total sales taxes would be 16% or greater. 

Amendment 5 allows the State Legislature for 5 years to bypass the Hancock amendment's requirement that any significant tax increase be approved by a vote of the people. It also allows them to expand what is taxed to include services. So, services like childcare, doctor’s visits, home and car repairs, and financial services could be taxed. 

According to the Missouri Budget Project, a median-income Missourian earning $65,400 per year would pay $535 more in taxes. These median-income earners would not pay income taxes but would end up paying more in taxes on the goods and services they need. The only group paying less is the top income earners.

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.  

Another concern is that even if lawmakers expand the existing sales tax to all services, the revenue will fall far short of offsetting the loss of income tax revenue. In this year’s state budget, we have already seen painful cuts to critical services and a $190 million gap in funding for the foundation formula for K-12 public education. Amendment 5 would lead to even steeper cuts in the coming years. 

I will be having conversations with my board of directors about this issue, and I urge everyone to do their own research on Amendment 5.  My assessment is that it will dramatically increase daily costs for Missourians and dampen consumer spending in communities across the state. And here locally, many will be tempted to make their purchases in Kansas. Supporters claim it will lead to economic prosperity in Missouri; however, that’s certainly not my view.