Why It Matters
Missouri voters will decide August 4 whether to eliminate the state’s individual income tax, a move that would reshape the state’s fiscal foundation and potentially rank Missouri among a small group of states funding government without that revenue source. The decision carries long-term consequences for state spending, tax structure, and how Missouri competes for residents and businesses.
What Happened
Missourians will vote on a constitutional amendment that would require the state legislature to gradually reduce the individual income tax rate, with a goal of complete elimination by 2032. Individual income tax currently supplies 63 percent of Missouri’s general revenue in fiscal year 2025, making it the single largest funding source for state operations.
If approved, the amendment would shift Missouri toward a broad-based sales tax to compensate for lost revenue. The current state sales tax rate stands at 4.225 percent. Governor Mike Kehoe has suggested potential exemptions for healthcare, agriculture, and real estate, though House-passed legislation did not include specific language mandating such carve-outs. State Rep. Bishop Davidson, a Republic Republican and sponsor of the resolution, noted that “the amendment that voters will consider does not mandate that the state make any changes to a sales tax.” Missouri’s balanced-budget requirement means the legislature would need to identify offsetting revenue sources or adjust spending if the income tax is phased out.
By the Numbers
63% — individual income tax as a share of Missouri general revenue in fiscal year 2025
2032 — target year for complete income tax elimination under the proposed amendment
4.225% — current Missouri state sales tax rate
10th — Missouri’s projected rank among U.S. states without individual income tax, if voters approve
Zoom Out
Nine states currently operate without individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Each has constructed a distinct revenue model to fund state services.
Alaska repealed its income tax in 1980 and relies heavily on oil-related revenue. In most years, petroleum taxes account for approximately 30 percent of the general fund, while investment returns supply roughly 60 percent—a model dependent on the state’s natural resource wealth and investment discipline.
Florida derives 70 percent of general revenue from sales tax and 11 percent from corporate income tax. Texas, which first imposed its sales tax structure in 1961, raises over half its budget from sales tax, currently set at 6.25 percent. Washington funds 45 percent of its budget through sales and use tax (6.5 percent) and collects nearly one-fifth of revenue through a business and occupation tax applied across 50 business classifications.
New Hampshire phased out its individual income tax in 2025 and now derives approximately one-third of its budget from a business profits tax and one-tenth from meals and rooms taxes. Tennessee generates 60 percent of revenue from a general sales tax set at 7 percent and collects 16 percent from franchise and excise taxes. South Dakota, with a 4.2 percent base sales tax, supplements sales revenue through a contractor’s excise tax at 2 percent.
Washington recently enacted a “Millionaires Tax”—a 9.9 percent income tax on earnings above $1 million per person, beginning in 2028. Wyoming funds under 40 percent of its budget through general and select sales tax and compensates through mining fees ranging from 1 to 6 percent by mineral type, with investment income and severance taxes supplying 47.51 percent of the general fund.
What’s Next
Missouri voters will cast ballots on the amendment on August 4. A yes vote would trigger a legislative process to design and implement the phased income tax reduction and identify or expand revenue sources to maintain balanced budgets. The specifics of sales tax structure, exemptions, and any additional levies would require subsequent legislative action. The governor’s broader tax overhaul plan has already tested divisions within the Republican Party on fiscal strategy.