Missouri voters crush anti-income tax referendum

Office of Governor Mike Kehoe

Missouri voters on Tuesday soundly rejected Amendment 5, which would have eliminated the state income tax. 

The proposed constitutional amendment would have overridden the Hancock amendment, a rule requiring voter approval of major tax hikes, to help lawmakers replace the lost income tax revenue with higher sales taxes and other taxes.

Missouri has a graduated individual income tax and a flat corporate income tax rate, according to the Tax Foundation.

More than 83% of voters rejected the proposed amendment, said Scott Charton, communications director for the Missouri Realtors campaign committees that opposed Amendment 5 and Amendment 4. 

The latter, which was also defeated Tuesday, would have raised the bar for citizen initiatives amending the state constitution to pass. The standard proposed in Amendment 4 would have been the toughest in the nation, according to the Associated Press.

"It was a tax swap," Charton said of Amendment 5. "The politicians wanted to have none of those restrictions so they could just raise the sales tax rate on goods and drastically expand the tax on services."

Not every measure on the ballot met defeat on Tuesday. Amendment 1, which funds state parks and soil and water conservation districts with a .001% sales tax, was renewed with 82.3% of the vote, KTVI St. Louis reported. 

"Throughout this conversation on eliminating the state income tax, we made the case that Missouri should think boldly about its future, challenge the status quo, and pursue policies that make our state more competitive," Gov. Mike Kehoe said in a statement. "While Amendment 5 did not earn the support it needed, I believe our work is far from over." 

His communications director, Gabby Picard, declined further comment.

"When something loses by that margin, it's never just one thing. It's a lot of things," Patrick Tuohey, senior fellow at the St. Louis-based Show Me Institute, said on Wednesday. The institute favors reducing or eliminating the state individual income tax.

"Just from what I observed when I spoke to Missourians, I think Missourians don't appreciate the financial situation that Missouri is in," he said. "We have been one of the slowest growing states. We are not growing population-wise… we lost a congressional district in 2012 (following the 2010 census). And our tax system is outdated. It was built for a time when people spent a lot more on products rather than services."

Tuohey noted that Missourians voted for Trump in the last presidential election by a wide margin, so "this defeat is significant," he said. "This state should have been primed for this type of argument."

Besides the organizations actively opposed to Amendment 5 — trade groups like Missouri Realtors as well as progressive groups — many traditional allies of the Republican Party sat on the sidelines, such as the Missouri Chamber of Commerce.

"With Amendment 5, it was basically a bait and switch," Charton said Wednesday. "The legislature did not need to amend the Missouri constitution to eliminate the income tax. They could zero it out today — they could do it statutorily."

Charton noted that on top of the Hancock amendment, which was passed in the 1980s, two other "current constitutional taxpayer protections were initiated through the efforts of" Missouri Realtors and were threatened by the two amendments defeated Tuesday.

One, Amendment 3, passed in 2010, and grew out of concerns that the state would apply a transfer tax to real estate transactions. Over 83% of voters approved that citizen initiative ballot measure, Charton said.

The other, Amendment 4, which dates back to 2016, was spurred by the rise in jurisdictions taxing services. Missouri Realtors again "went the citizen initiative petition route," Charton said, noting that plans to tax services included a tax on realtor commissions.

"Other professional organizations joined us (and) 57% of Missourians approved" that constitutional amendment, he said.

Tuohey criticized the 2016 constitutional amendment, which said that "anything that was not taxed in 2015 may never be taxed," he noted. 

"There are some ways that we've harmed ourselves," he said, pointing to the Department of Revenue's website, which lists hundreds of tax exemptions, "everything from clay shooting pigeons to barges to everything that goes inside of a data center."

Over the years, "Missouri has accrued all these little tax decisions which by themselves weren't a problem but in the aggregate are really hurting our ability to develop a modern tax code," he said.

As for Tuesday's election, Charton, who has served as a consultant to Missouri Realtors since 2009 and ran communications for their 2010 and 2016 campaigns, said "we're feeling pretty good" following the defeats of the two amendments.

He said candidates from both parties told him that when they went out campaigning, "this was the only thing voters wanted to talk about," along with Amendment 4.

"You've got to make the case first," Tuohey said of proponents' mistakes. "You've got to explain to people that the status quo isn't good, if that's your argument… I don't know that (that first step) was done."

The governor said in his Tuesday statement that he remains committed to "working with the General Assembly in the years ahead on ways to continue cutting taxes."

Charton said Missouri Realtors' door is open. "We extend our hand in good faith to lawmakers who want to grow Missouri's economy," he said.

"As to those who want to just try it again, I would say this: look at the numbers," he added. "In the cartoons, the coyote keeps on getting crushed by the boulder… Sometimes you need to read reality."