What Just Passed the Senate — and What It Could Mean for Your Family

A balanced look at HJR 173, the constitutional amendment on the November 2026 ballot that would eliminate Missouri's income tax and expand sales taxes to services you use every day.

On your ballot in November 2026, you'll be asked a simple-sounding question: should Missouri phase out its state income tax and give the legislature the power to expand sales taxes to services not currently taxed? The ballot language emphasizes phasing out income tax, protecting schools, and reducing local taxes when revenues grow. Behind that language is one of the most consequential restructurings of state government finance in Missouri history. This article walks through what the plan actually does, who gains and who loses, what the evidence from similar experiments tells us, and what's buried in the legal fine print.

The resolution — Senate Substitute for Senate Committee Substitute for House Committee Substitute for House Joint Resolutions 173 & 174 — does three things that matter:

First, it amends Article X, Section 4(d) to require the legislature to reduce and eventually eliminate the state individual income tax through automatic reductions tied to revenue growth. Once the top rate drops below 1.4%, it goes to zero, and the legislature is constitutionally prohibited from ever imposing a state individual income tax again.

Second, it amends Article X, Section 26 to lift the 2015 constitutional protection that prevents the legislature from taxing services that weren't taxed as of January 1, 2015. Any such expansion must be "for the purpose of reducing and eliminating the state individual income tax and reducing local tax rates," and must be offset in the same legislation by income tax reductions.

Third, for five years after the amendment takes effect, any sales tax expansion passed under the new authority is exempt from the Hancock Amendment's revenue cap on new legislation, and from the constitutional rules that normally divert motor vehicle sales tax revenue to highway funds.

The fiscal note produced by the Committee on Legislative Research estimates the revenue impact, assuming no replacement taxes are enacted. The numbers are striking.

That represents roughly 55% of the state's general revenue spending authority. In the fiscal note's own words, applying a 55% reduction across all general-revenue-funded agencies would mean cuts of that magnitude at the Department of Elementary and Secondary Education, Social Services, Corrections, Mental Health, Public Safety, and every other major state function. The note also projects elimination of the income tax by tax year 2028 — three to four years faster than the "by 2032" timeline the governor and legislative leaders have publicly described. Sen. Rusty Black (R-Chillicothe), who chairs the Senate Appropriations Committee, has called this a "drafting error" and said it "will have to be fixed" before final passage.

Whether the drafting stays or gets fixed matters, but the underlying design is the same: a large revenue shortfall happens unless replacement revenue from an expanded sales tax arrives at the same pace. The design is also one-way. Once the income tax is zero, it cannot constitutionally return.

Any honest discussion of whether this change "improves" Missouri has to begin with where Missouri stands today. The picture is more competitive than the proposal's urgency might suggest.

Missouri's sales tax is already the one part of the tax code that drags on its competitiveness ranking. The combined state and average local rate is 8.41%, with some jurisdictions exceeding 10%. The one thing the proposal demonstrably makes worse is the one thing Missouri already does less well than its peers.

Supporters of the amendment commonly claim Missouri's state sales tax rate would stay "under 6%" after the swap. Does the arithmetic actually support that?

Here's what we know. Missouri's 3% general-revenue portion of the state sales tax generates about $3.09 billion annually on the current tax base (goods, reduced-rate groceries, and a few services). Each percentage point of rate therefore produces roughly $1.03 billion. The individual income tax generates about $8.5 billion that needs replacement. The current state sales tax rate totals 4.225% (after earmarks for education, conservation, and parks). The average local rate adds another 4.22%.

With those numbers in hand, we can work out three realistic scenarios:

The Missouri Budget Project, which has modeled this closely, concludes that without base expansion the state general sales tax rate would need to rise from 3% to 11.5% — pushing the average Missourian's total sales tax to about 17%, and closer to 19% in high-tax areas. Even with service expansion, one of the bill's own Senate sponsors, Sen. Curtis Trent (R-Springfield), has acknowledged that combined rates above roughly 20% would risk failure of the reform itself, because shoppers would cross state lines.

There's a second problem with the "under 6%" framing. When proponents say 6%, they usually mean the state rate. But Missourians pay the combined rate. Even under the most aggressive base-expansion scenario, the average combined rate would be around 9%, and well above 10% in St. Louis, Kansas City, Springfield, and other higher-local-tax jurisdictions. That would make Missouri's combined rate higher than every neighbor except Tennessee.

The most important question about any tax restructuring is a simple one: who pays more, and who pays less? The distributional data makes the answer clearer than the political rhetoric usually admits. Missouri's current tax system already has an uneven impact across income groups, according to the Institute on Taxation and Economic Policy's 2024 "Who Pays?" analysis.

In Missouri's current system, the lowest-income households pay the largest share of their income in state and local taxes. The top 1% pays about 5.7%, the lowest 20% pays about 9.8%. Missouri ranks 31st on ITEP's Tax Inequality Index, middle-of-the-pack among states.

That gap matters regardless of your tax philosophy. Supporters of a progressive tax system want the wealthy to pay a higher percentage. Supporters of a flat tax system want everyone to pay roughly the same percentage. Under either standard, a system where the lowest earners pay 9.8% and the top 1% pays 5.7% is upside-down. A fair flat-tax approach wouldn't produce a 4-point gap against working families.

Now look at what each tax contributes by income group:

The math is hard to escape. Sales and excise taxes already take 5.3% of income from the bottom 20% and only 0.9% from the top 1%. Income taxes do the opposite — 0.5% for the bottom and 3.5% for the top. Eliminating the progressive side and expanding the regressive side mechanically makes the system more upside-down.

There's a pro-growth counter-argument worth taking seriously: if the swap attracts new residents, new businesses, and new high-income earners, then faster overall growth could produce rising wages and job opportunities that benefit everyone — including the lower-income households who look worse off on paper. That's an empirical claim. Whether it pans out depends on evidence from states that have tried it.

The strongest argument for elimination is that people will move to Missouri. This is also the argument most often oversimplified in political talking points. The actual data tells a more nuanced story.

What's true: States with no income tax, on average, do gain more residents through interstate migration than states with high income taxes. In 2024, the Tax Foundation found that the top third of states for net migration had an average top income tax rate 3.2 percentage points lower than the bottom third. Tennessee, Texas, Florida, Nevada, and Wyoming have all gained population consistently.

What's also true: When movers are actually surveyed about why they moved, taxes rank fourth or lower. A Census Bureau survey found 48% moved for housing reasons, 30% for family reasons, 16% for employment. The Center on Budget and Policy Priorities found that 68% of interstate movers cite job and family reasons as the primary driver — and only about 9% cite any category that could include a desire for lower taxes.

What's underreported: Over the past ten years, four of the nine no-income-tax states ranked in the bottom half of states for per-capita personal income growth — including Texas. California, Massachusetts, and Minnesota all outperformed Florida on this measure. Illinois and New York outperformed Tennessee and Texas. Having no income tax hasn't translated into faster income growth for residents of no-income-tax states.

Academic research also finds that high housing costs and cold winters deter migration into high-tax states as much as taxes themselves. Missouri doesn't have the first problem to lose, and it can't do anything about the second. It also doesn't have the coastlines, climate, or major tourism draws that have powered Florida's and Tennessee's growth.

The Senate hearing on HJR 173 stretched more than two hours and drew testimony from across the political spectrum. Several themes emerged that deserve Missourians' attention because they came from voices usually found on different sides of policy debates — yet they converged on many of the same concerns.

The core message from the opposition: "We're with you on income tax elimination — just not this way"

Opponents did not oppose eliminating the income tax. Many of them explicitly supported it. What they opposed was this mechanism — the tax swap that adds a new service tax to replace the one being removed, the loopholes in the bill's text, and the lack of specifics about what will actually be taxed or at what rate.

Pannett's framing echoed across multiple opposition witnesses: the legislature already has the authority to reduce or eliminate the income tax. What it needs voter approval for is expanding the tax base to services — and Missouri voters have already said no to that, twice, on the ballot. Linking the two together on a single ballot question is, in her words, "a deceptive way to get taxes on services."

A conservative business voice against the bill: "Missouri is already winning"

A former Revenue Director: "Sixth lowest taxed, sixth lowest growing"

The Governor's promised exemptions — not in the bill

Seniors, AARP, and people with disabilities — a large and vulnerable constituency

The Circuit Breaker point is one of the more overlooked consequences of full income tax elimination. Hundreds of thousands of low-income Missouri seniors and disabled residents currently receive property tax relief through a credit administered through the state income tax system. Without an income tax return, that delivery mechanism becomes considerably harder to maintain. The bill text doesn't address how it would be preserved.

The stakeholders who say they haven't been consulted

Perhaps the most striking pattern at the hearing was the number of organizations — including many that usually align with Missouri's Republican leadership — who took "informational only" positions because they hadn't been meaningfully consulted and couldn't evaluate a bill whose actual fiscal impact depends on legislation that doesn't exist yet.

Sen. Patty Lewis (D), a Democrat senator sitting in on the hearing, put it plainly after hearing the Kansas City Chamber testimony: "I'm sitting here in this committee and it's very, I mean, with such a huge initiative, it's mind-blowing to me that so many stakeholders haven't been brought to the conversation. And there's quite a few testimony and informational purposes... I just beg us all to just pause and let's try and get this right."

Education funding deserves its own section because Missouri's school finance structure is unusual — and that structure makes HJR 173's impact on schools unusually uncertain.

Missouri's school funding picture — before HJR 173

Missouri ranks seventh in the nation for reliance on local property tax revenue to fund public schools, according to the National Center for Education Statistics. Local sources provide roughly 47% of Missouri school funding, compared to a national average closer to 37%. State aid in Missouri makes up just 30% of school revenues — the lowest share of any state in the country. Federal funds fill the rest.

Put another way: Missouri's public schools depend on local property taxpayers more than almost any other state in America, and on state government less than any state in America. According to the Missouri Independent, statewide property tax revenue in 2024 was $10.4 billion — more than the state personal income tax generates. This is already a property-tax-funded education system.

The timing problem: a formula rewrite is happening right now

In 2025, Governor Kehoe issued Executive Order 25-14, creating the Missouri School Funding Modernization Task Force. The Task Force is charged with recommending revisions to Missouri's K-12 education funding formula. Its final report is due December 1, 2026 — approximately one month after Missouri voters will have already voted on HJR 173.

That timing matters. Voters will be asked to approve a constitutional amendment that fundamentally restructures state revenue at least a month before they know what the state's new education funding formula looks like. The Task Force's work reportedly includes examining Missouri's heavy reliance on property taxes, the disparities between wealthy and poor districts, and whether current formula assumptions (still based partly on 2005 property values) need updating.

What HJR 173 says about schools — and what it doesn't

HJR 173 contains one explicit school protection: Section 26.3(2) says that when local tax rates are adjusted downward to offset the new revenue from expanded sales tax, schools are exempt from that reduction. In other words, schools keep the new revenue — they do not have their levies cut.

At the hearing, Rep. Davidson (the bill's House sponsor) pointed to this provision in his closing remarks: "it says unequivocally, very clearly, under no circumstances shall any county or other political subdivision make an adjustment under this subsection to result in any reduction in funding to public schools."

This is a real protection at the local level. But it has two significant limitations:

1. It only protects the local portion of school funding. The bill's language speaks to "political subdivisions" — meaning school districts and the local taxes they levy. It does not protect the state's share of school funding, which flows through the foundation formula and is paid from general revenue. If general revenue drops 55%, the state contribution to the foundation formula is at risk.
2. It doesn't account for growth. The provision prevents reductions, but it doesn't adjust for inflation, population growth, or increased costs. It locks schools at a particular funding level, not at a particular share of state resources. Over time, a level-funded education system shrinks relative to everything else.

Missouri Budget Project analyst Jeremy Lefevre made this point at the hearing: "There is a contemplation in the legislation around education funding, but it is limited to the local amount and not a cut. And so there's some talk that the language completely protects education funding, and that's not true because it doesn't protect the state portion of that."

What happens to rural school districts

Missouri has 514 school districts, and they are not equally positioned. Districts in growing metro areas with rising property values collect more local revenue per pupil; rural and declining-value districts collect less and rely more on state support. A Kirkwood School District CFO recently observed that Missouri ranks fifth in the nation for percentage of school funding from local property taxes and 50th for state support — and that at Kirkwood, 85% of the district's budget comes from local sources because the district is property-wealthy.

The rural consequence is different. Rural districts often get a larger share of their funding from the state, precisely because their local tax base is smaller. If state general revenue falls, rural districts feel it first. The Missouri Rural Crisis Center testified that in rural communities, this "looks like a decision to consolidate schools or increase class sizes." The Missouri School Boards Association noted that "districts that disproportionately rely on state funding — rural districts — will be forced to make really tough decisions such as consolidation, layoffs, or holding back raises."

Missouri proponents point to Tennessee constantly. Tennessee deserves a closer look because its current fiscal reality is less flattering than the pitch suggests.

What Tennessee's experience actually demonstrates is that a consumption-tax economy is workable, but fragile. When consumers slow spending, revenue falls immediately. When business tax cuts pile on, shortfalls compound. And the tax burden visibly shifts onto working families while corporate and high-income tax bills shrink — which is one reason Tennessee's low-income effective tax rate is the 3rd highest in the country.

The proposal is sold partly as a way to attract businesses. But CNBC's 2025 "America's Top States for Business" ranking — one of the most widely cited — weights categories this way:

Missouri's overall rank fell from 18th in 2024 to 34th in 2025 — a 16-spot drop. The state's strengths are Cost of Doing Business and Cost of Living. Its chronic weaknesses are Workforce and Life/Health/Inclusion. Here's the problem for HJR 173:

This is where the insight from site-selection consultants matters. Area Development's 2025 survey of consultants who advise companies on relocation decisions concluded flatly: "States no longer rise to the top simply by offering low taxes or generous incentives. Today, it's about execution — how quickly and reliably a state can align land, labor, logistics, and leadership behind a fast-moving project." Workforce development, energy infrastructure, site readiness, and permitting speed matter more than tax rates for modern corporate site selection.

Defenders of the swap sometimes argue that sales tax revenue is more stable than income tax revenue. The evidence is genuinely mixed.

Historically, general sales taxes are less volatile than graduated income taxes — especially when states rely on capital gains income. Tax Foundation analysis of the Great Recession showed income tax revenue fell further and recovered more slowly than sales tax revenue. Pew Charitable Trusts research finds corporate income taxes are the most volatile category, followed by personal income taxes, with sales taxes somewhat more stable.

But — and this is a significant but — the Center on Budget and Policy Priorities notes that income taxes also grow faster in good times. Taken over full business cycles, income tax revenue rises enough to keep up with normal expenditure growth; broad sales tax revenue, on average, doesn't. States that eliminate income tax often find revenue falls behind the real cost of funding services over the long run.

Two Missouri-specific wrinkles matter:

1. Missouri already eliminated capital gains taxation in 2025 (HB 594). Capital gains is the most volatile component of income tax revenue. Removing it already reduced Missouri's income tax volatility, which weakens the "sales tax is more stable" argument here.
2. Tennessee right now demonstrates what happens when consumption slows. Tennessee's year-to-date revenue shortfall is largely because consumers are buying fewer big-ticket items. A state that depends heavily on consumption is more vulnerable to the kinds of slowdowns that modern economies now experience — from tariffs, from inflation, from supply-chain shocks.

The bill requires that any expansion of the sales tax to services be "offset in the same legislation by a reduction in the top rate of individual income tax" that is "substantially equal" to the new revenue. That language sounds tight. It isn't.

Read carefully, the bill contains several material loopholes:

Two related fiscal dynamics deserve attention because they change what HJR 173 actually does without changing its surface description.

First, the post-COVID substitution unwind. During 2021–2024, Missouri used $2.7 billion in federal ARPA funds to pay for things that would normally come out of general revenue, which made GR look healthy (large surpluses accumulating). Now that ARPA is depleting, those costs are returning to GR — which makes GR look suddenly strained. State Auditor Scott Fitzpatrick's December 2025 analysis confirmed the dynamic: "There will be upward pressure on the general revenue fund from changes to shared federal programs and spending from soon-to-be-depleted funds that substitute for general revenue." The apparent "GR pressure" driving the urgency of tax reform is partly a consequence of how one-time federal money was used — not necessarily a sign of underlying fiscal crisis.

Second, the revenue-dedication pattern. Missouri increasingly channels new revenue into dedicated funds that don't flow through general revenue at all. Marijuana tax revenue ($255 million in 2025) is constitutionally earmarked to veterans, public defenders, and drug treatment. Prop C (1982) dedicates 1% of sales tax to K-12. Conservation and Parks sales taxes are constitutionally protected. Lottery and gaming proceeds add about $900 million to education outside GR. As a result, the Missouri Budget Project calculates that income tax comprises a significant portion of state general revenue, but just 32% of total state-generated funding. Most state money is already in protected buckets.

Inside HJR 173 itself, this pattern continues:

• Section 26.3(2) explicitly exempts public schools from the local tax-rate reduction that would otherwise offset the expanded base. Schools therefore capture the entire increase in sales tax revenue from newly-taxed services within their political subdivision — a permanent new revenue stream outside of general revenue.
• Section 26.4 requires the Conservation and Parks dedicated sales taxes to be adjusted down to maintain revenue-neutrality on their earmarked programs — meaning the difference flows to other state uses.
• Section 26.2 for five years diverts motor vehicle sales tax revenue away from highway funds toward general revenue.

The effect, taken together, is that total state spending can remain roughly stable while general revenue itself shrinks dramatically. That shrinkage makes income tax elimination look more "affordable" than it is in underlying program terms. Voters approving HJR 173 may be authorizing a restructuring of state finance that goes well beyond a simple tax swap — one that creates an ongoing justification for future sales-tax expansions. Once revenue is diverted into earmarked or protected accounts that never flow through general revenue, the legislature can credibly argue that GR still needs more, even when total state revenue is rising. The 2015 constitutional wall against taxing services — the specific protection voters put in place to prevent this kind of dynamic — is permanently removed.

So after walking through the math, the testimony, and the loopholes — does HJR 173 improve Missouri for everyone, for some, or make things harder?

The most honest answer, based on the evidence we've reviewed, is: mixed and uneven.

It likely helps, modestly, some groups: High earners who currently pay the full 4.7% top rate and who have discretion over consumption levels. Pass-through business owners. Capital investors (though Missouri already eliminated capital gains tax in 2025). Companies making location decisions where the top marginal rate is a visible factor.

It likely hurts, measurably, other groups: Seniors on fixed incomes who already pay little income tax but buy services daily. Low-income and middle-income households for whom sales tax represents a larger share of their budget. Renters and others who would face newly-taxed essential services. Rural Missourians whose local sales-tax rates are already near the top of the state range.

It may be genuinely neutral for some: Upper-middle-income households who would gain roughly equivalent income tax savings and sales tax costs, depending on their consumption patterns.

It creates risk for all Missourians — across the income spectrum — through the possibility that replacement revenue won't arrive fast enough to offset the income tax loss, producing large cuts to state services (education, corrections, mental health, infrastructure) that affect everyone.

The proposal does not address Missouri's actual competitive weaknesses — workforce quality, education funding, quality-of-life metrics — and threatens two of its greatest current strengths: its low cost of doing business and low cost of living. It adds constitutional constraints that are one-way, locking Missouri into a structure that, if it doesn't work, can't easily be unwound.

A principle-over-party view

Act for Missouri's position on this bill can be stated plainly. Eliminating the state personal income tax by itself — through responsible spending cuts and real economic growth — would be a good thing for every Missourian. We're for that. Many of the opponents testifying against HJR 173 said the same thing, including those representing seniors, working-class families, and citizen groups. There is a path to zero income tax that would require no new tax expansion, no sales tax on services, and no deferred-accountability loopholes. The legislature already has the authority to take that path. It has chosen not to.

What HJR 173 does instead is replace one tax with another, and that is not a conservative approach. True conservatism demands a serious conversation about the purpose and proper size of government — about what the state should do, what it should stop doing, and what it should fund accordingly. That conversation hasn't happened here. Instead, Missourians are being asked to authorize a massive fiscal restructuring on the promise that responsible choices will be made afterward. Based on the testimony this bill has received — from the Missouri Chamber, the Kansas City Chamber, the Municipal League, the School Boards Association, the Realtors Association, and others who say they have not been meaningfully consulted — no such plan exists.

There is also the matter of trust. Missouri state spending has grown from roughly $27 billion a decade ago to over $50 billion today. The legislature and governor have not demonstrated the kind of sustained spending discipline that would justify handing them constitutional authority to expand the sales tax base. Before Missourians give their state government access to a new, broader, and potentially larger pool of revenue, that government should first demonstrate it can control the revenue it already has. Nothing in recent budget history suggests that has happened.

We support large cuts to state spending, but they must be responsible in what gets cut and when. Cuts that fall heaviest on seniors, working families, and the most vulnerable — either directly through higher sales taxes on essentials or indirectly through service reductions — are not conservative cuts. They're just cuts. A principled approach would name the functions of state government that should be reduced, bring voters into that conversation honestly, and leave the revenue structure alone until the spending side of the ledger is in order.

The arithmetic in the ITEP data matters regardless of your tax philosophy. Whatever your view of progressive versus flat tax systems, a state where the lowest earners pay 9.8% of income in state and local taxes while the top 1% pays 5.7% is not balanced. Eliminating a tax that contributes mostly to the upper rates, and expanding a tax that contributes mostly to the lower rates, makes that imbalance worse — not better.

Resources for voters

If you want to read the primary documents yourself before deciding:

• The bill text: Senate Substitute for SCS for HCS for HJRs 173 & 174 — available at the Missouri General Assembly website.
• The fiscal note: LR No. 6854S.06C, Committee on Legislative Research Oversight Division, April 13, 2026.
• Act for Missouri's ongoing coverage and past analysis: act4mo.org/articles
• Missouri Budget Project (progressive perspective): mobudget.org
• Tax Foundation (fiscally conservative perspective): taxfoundation.org/location/missouri
• Institute on Taxation and Economic Policy — "Who Pays? Missouri": itep.org
• Missouri State Auditor's General Revenue Fund Analysis (official state agency): auditor.mo.gov
• Find your Missouri legislators using the lookup tool at the top of this page to share your views before the November 2026 vote.

Act for Missouri is a principled conservative grassroots organization focused on educating, activating, and engaging Missouri citizens — principle over party. This article was prepared for publication in April 2026, reflecting the version of HJR 173 that passed the Senate Fiscal Oversight Committee on April 13, 2026. The final bill language may change before voters see it in November; check act4mo.org/articles for updates and our continuing coverage.