Missouri small businesses worry their sales taxes could double under plan to end income tax

Missouri lawmakers are proposing to eliminate the state’s income tax, but small business owners fear the move could double sales tax rates to cover the lost revenue. Anna Meyer, owner of a Columbia bakery, already charges an 8.5% sales tax and says doubling it would push up prices on items like her $2.50 cookies, forcing customers to buy less. She warned that higher costs could force her to close if sales drop, as her profit margins are already tight. The shift would also burden service-based businesses like Daniel Moline’s CPA firm in Blue Springs, which has never collected sales tax. Moline warned that many owners may unknowingly violate tax laws, risking audits and back taxes. Additionally, businesses would face extra costs hiring accountants to navigate the new system, further cutting into profits. Republican lawmakers argue that increasing sales taxes would offset the billions lost from income tax repeal. However, Moline dismissed the idea that businesses would flock to Missouri, noting that potential newcomers would quickly realize sales taxes would rise significantly. He cited Kansas’s 2012 tax cuts, which failed to attract more businesses or boost economic growth, as proof that such reforms don’t deliver on promises. Michael Smith, author of a study on Kansas’s tax experiment, confirmed that the state saw no net migration gain despite eliminating income taxes. He argued that small tax changes don’t drive economic decisions, as employers prioritize workforce availability over marginal tax differences. Missouri’s proposal now rests with Gov. Mike Kehoe, who must decide by the end of the week whether to put the measure on the ballot for voter approval. Meyer criticized the legislature’s financial mismanagement, comparing it to her own business struggles. She questioned why lawmakers could propose a plan that would force her to abandon profitable services, like decorated cakes, while other businesses face similar constraints. The debate highlights tensions between tax reform goals and the practical impacts on small businesses across the state.