Missouri Appeals Court Rewrites Ballot Language for Income Tax Elimination Proposal

A Missouri appeals court on Friday rewrote the official ballot summary for a proposed constitutional amendment that would eliminate the state's individual income tax and replace the revenue by expanding sales taxes. The ruling from the Missouri Western District Court of Appeals keeps the controversial measure, known as Amendment 5, on the August 4 primary ballot but mandates clearer, more detailed language for voters to consider.

The court’s decision upholds a lower court ruling that the amendment is constitutionally sound, but it overturned Cole County Circuit Judge Christopher Limbaugh’s earlier finding that the original ballot language was “fair and sufficient.” The appeals court panel determined the summary written by the state legislature was inadequate and required significant revision to properly inform voters of the measure's full scope and consequences.

In its order, the court stated that its rewrite was necessary to clarify the direct link between phasing out the income tax and broadening the sales tax base. The new language explicitly informs voters that the amendment would allow the legislature to impose sales taxes on new goods and services not currently taxed. This was a key point of contention for opponents, who argued the original summary obscured the potential for what they call the largest sales tax expansion in Missouri history.

“The resolution’s curtailment of constitutional limits on the taxing authority in Missouri makes it necessary for a sufficient summary statement to inform voters so that they may assess the costs and benefits of the resolution and make a voluntary decision regarding whether to grant new authority to their legislature,” the court wrote in its decision.

Further changes mandated by the court include clarifying that a “no” vote would not prevent the legislature from making future changes to the tax system through other means. The revised summary must also now note that the amendment would compel local governments to cut their own tax rates if state sales tax revenue increases, though without reducing funding for schools.

The legal battle over Amendment 5 has been swift. The measure was a top priority for the Republican-led legislature and Governor Mike Kehoe during the last session, passing in April. Gov. Kehoe decided in May to place it on the August primary ballot. Shortly after, a lawsuit was filed by attorney Chuck Hatfield on behalf of a Missouri resident, challenging the proposal on two main fronts: that it violated the state constitution’s single-subject rule for amendments and that its ballot summary was misleading.

On Monday, June 1, Judge Limbaugh rejected both arguments, ruling that all provisions of the amendment were sufficiently related to the central theme of restructuring state and local taxation. He also found the original language met the legal standard of being unbiased and sufficient. That decision was immediately appealed, leading to Friday's partial reversal by the higher court.

Supporters of Amendment 5, including Gov. Kehoe, argue that eliminating the personal income tax would stimulate economic growth and make Missouri more competitive with states like Texas and Florida that have no income tax. They believe a consumption-based tax system is more equitable and encourages investment.

Opponents, however, warn of the potential negative consequences, drawing parallels to a similar tax overhaul in neighboring Kansas that led to significant budget shortfalls. They argue that shifting the tax burden from income to sales is regressive, disproportionately affecting lower and middle-income families. Critics also contend the amendment would give lawmakers a “license to ignore current constitutional taxpayer protections, including the citizens’ right to vote on big tax increases,” as Hatfield argued.

For Missouri businesses, the proposed shift represents a fundamental change in tax compliance. While eliminating the state income tax on pass-through business profits would be a welcome development for many sole proprietors, partnerships, and S-corporations, the trade-off is a vast and potentially complicated expansion of sales tax obligations.

While the prospect of no state income tax is attractive, the operational reality of expanding sales tax to services could be a significant burden for many small and mid-sized businesses. Companies in sectors that have never had to deal with sales tax—such as consulting, legal services, contracting, or IT support—would suddenly face complex new compliance requirements. Our experience shows that this is not a simple swap. It requires implementing new accounting systems, training staff to correctly identify taxable services, and establishing processes for collecting, remitting, and reporting taxes to the state, and potentially to multiple local jurisdictions with varying rates. This operational overhaul can be costly and time-consuming, diverting resources from core business activities. We help clients navigate precisely these kinds of regulatory shifts through our tax preparation and compliance services. For businesses concerned about how to prepare for such a change, C&S Finance Group LLC at csfinancegroup.com can provide guidance on structuring their financial operations to handle new compliance demands.

The timeline for finalizing the ballot language is extremely tight. Any appeal of the appellate court's decision must go to the Missouri Supreme Court, which would need to hear arguments and issue a final ruling by Tuesday, June 9—the statutory deadline for courts to make changes to the primary ballot. As of Friday evening, it was not yet clear if an appeal would be filed, leaving the final wording of the pivotal tax question in a state of temporary uncertainty.