COLUMBIA — Missouri Court of Appeals Decision

The Missouri Court of Appeals has decided to keep an amendment aimed at phasing out the state’s income tax on the August ballot. However, they’ve revised the language voters will see regarding its effects.

A panel from the Western District of Missouri issued this opinion following oral arguments presented the day before, concerning a challenge to the income tax plan. This plan will be on the ballot on August 4, under the title Amendment 5.

Amendment 5 proposes to gradually eliminate state income taxes while granting lawmakers authority to increase sales taxes significantly. If this proposal gains voter approval, the income tax could begin to be phased out next year.

At present, income taxes account for about two-thirds of Missouri’s general fund. To cover the revenue loss, the proposal would empower legislators to impose a sales tax on various goods and services throughout the state.

Lawmakers will determine which items to tax and at what rates over the upcoming five years.

This plan stipulates that any reductions in income tax must align with increases in revenue from the new sales tax. As a result, both Democratic and Republican lawmakers have referred to the measure as a “tax shift” instead of an outright tax cut prior to its passage.

Legal Background

Plaintiffs in the case contended that the proposed amendment was unconstitutional, claiming it violated the rule that only one constitutional amendment should be introduced at a time. However, the judge sided with the defendants, and the plaintiffs chose not to challenge this ruling in the appeals court. Ultimately, the Missouri Court of Appeals upheld the lower court’s ruling.

The court’s comprehensive, 27-page judgment deeply examined the appellant’s concerns related to the summary statement and wording provided to voters. The appellants claimed that the language approved by the Cole County judge was inadequate and misleading. The appeals court concurred, determining that both the summary statement and the fair ballot language did not sufficiently inform voters about the amendment’s significant consequences. Consequently, the justices revised this language.

Revised Voting Language

The rewritten summary appears on the ballot itself. The court altered how the statement reads.

Court of Appeals Ballot Summary

Should the Missouri Constitution be amended to:

• Legally mandate the gradual elimination of individual state income taxes tied to revenue growth, while permitting the expansion of sales and use taxes.
• Loosen constitutional restrictions on the taxation of goods and services.
• If there is an increase in local sales tax revenues, should local tax rates be decreased without impacting school funding?

Moreover, the appeals court revised the description in the bill’s detailed explanation, known as Fair Ballot, which is presented at voting locations and online, though not on the ballot paper.

Fair Voting Language Explained

A “yes” vote would amend the Missouri Constitution to require the gradual elimination of individual state income taxes based on revenue growth, while allowing for sales and use tax expansion. It would also reduce constitutional boundaries on taxing goods and services. If local consumption tax revenues rise, it would mandate reductions in local tax rates without affecting school funding.

A “no” vote would keep the Constitution unchanged, meaning the law wouldn’t require phasing out or eliminating individual state income taxes based on revenue growth, nor would it permit sales and use tax expansions.

The potential tax impact remains unclear at this moment.