Missouri effort to end income tax could make it harder for Kansas City to fund local services

Missouri voters will vote on August 4 on a proposal to eliminate the state income tax by raising and expanding sales taxes. The measure, HJR 173, is a top priority for Republican lawmakers and Governor Mike Kehoe, who would be required to phase out the top income tax rate of 4.7% on incomes over $9,191 while prohibiting future reinstatement. To replace income tax revenue, the state sales tax rate would need to rise from 4.225% to 10.7%, or the tax base would need to expand to cover over $300 billion in economic activity, according to the Missouri Budget Project. Currently, services like haircuts, childcare, and digital purchases are exempt from sales tax, but the proposal does not specify exemptions." "Officials in Kansas City fear the plan will strain local budgets, as the city relies heavily on its 1% earnings tax, which generates nearly 45% of its general fund revenue and was renewed by voters in April until 2031. Assistant City Manager Tammy Queen noted uncertainty over how the city would adjust tax rates to comply with the bill, given its vague guidelines and potential impacts on businesses and social services. Low-income workers and seniors have expressed concerns that higher sales taxes could force difficult choices between essential expenses like rent, food, or medication." "The legislation allows local governments, schools, and fire districts to make one-time adjustments to local sales, property, or earnings taxes if the state expands its sales tax base. However, Kansas City’s prior commitments—such as the earnings tax renewal—complicate its ability to adapt. Without clearer details on how sales tax increases will be structured, local officials remain uncertain about the fiscal impact, leaving them with more questions than answers as the August vote approaches.