Missouri Could Soon Eliminate Income Tax but Increase Sales Taxes: Who Pays and Why It Matters Now

After eliminating its state capital gain tax last year, Missouri is now considering a far larger tax shift. Could this serve as a test case for other states? When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Delivered dailyKiplinger TodayProfit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. 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Missouri’s individual income tax raises roughly $8.5 billion to $9 billion each year — about 60% to 65% of state general revenue — and is the largest source of funding for schools, public safety, and core state services. If the income tax is phased out, most of that revenue would likely be replaced through expanded reliance on sales taxes.Missouri’s move comes as several other states, including Kentucky, Mississippi, and Oklahoma, have also cut or plan to phase out their income taxes, making the Show-Me State part of a growing national debate over how much states should rely on income taxes.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.A central question for voters is this: with no state income tax, who really ends up paying more, and how much will it cost households at the register?Missouri’s willingness to make sweeping tax changes was already on display last year when it eliminated state taxes on capital gains.Now, the question is whether Missouri will go further and end the broad‑based income tax altogether.As mentioned, Missouri’s individual income tax accounts for roughly 8 billion dollars a year and helps fund schools, public safety, and many core state services. If the income tax is phased out, most of that revenue would need to be replaced by a greater reliance on sales taxes and other changes to the state budget.Meanwhile, Missouri’s current state sales tax rate is 4.225%, according to the Department of Revenue, though many residents pay more once local taxes are added.Under the leading proposals, the state would gradually reduce the income tax over several years, with reductions tied to revenue triggers intended to avoid sudden budget chaos.Right now, Missouri's 2026 individual income tax tops out at 4.7% on taxable income over $9,436 (Single filers; brackets start at 0% up to $1,348, then climb in approx. 0.5% steps).If the no-income tax plan advances, the practical impact for most Missouri households would be:Because sales taxes are collected at the register, many residents would feel the tax burden on a daily basis, and many say the ultimate effect would also be uneven.That's because studies show that households with lower and middle incomes, which often spend a larger share of their income on taxable goods and services, would likely feel the change more heavily than wealthier households whose income is typically more tied to savings or investments.Supporters of the income‑tax‑to‑sales‑tax shift argue that the measure would make Missouri more competitive with no‑income‑tax states like Texas and Florida, reduce reliance on taxing wages, and simplify the tax code over time.They point to the recent elimination of capital gains taxes as proof that the state is comfortable shifting away from taxing certain forms of income and moving toward a more investment‑friendly system.Gov. Mike Kehoe has become a leading supporter of phasing out Missouri’s income tax.In his 2026 State of the State address and subsequent public comments, Kehoe called for the plan to be placed before voters through a constitutional amendment.He has argued that Missouri’s tax structure "should modernize for the times we’re in and not be burdened by a tax code written in another era," framing the income‑tax elimination as a central part of his economic agenda.However, some opponents of the measure, including the nonprofit Missouri Budget Project (MBP), warn that replacing roughly $8.5-$9 billion in annual income-tax revenue with higher sales taxes will sharply increase tax rates and potentially force cuts to essential public services.In a piece on its website regarding the impact of such a proposal on the state's rural communities, MBP writes the following."Missouri’s income tax supports nearly 2/3 of Missouri’s state general revenue budget – a critical state funding source for K-12 schools, mental health services, children’s services like childcare and foster care, and services for older adults like Meals on Wheels and respite care. There’s simply no realistic way to make up the revenue lost from eliminating the income tax – meaning harmful cuts to services for Missourians."Also worth noting: Missouri’s experiment could also influence how other states frame their own debates over reliance on income taxes, especially as more states look to cut or phase out their personal income tax.The measure, HJR 173/174, has passed both legislative chambers and awaits Gov. Kehoe's decision by May 22 on whether to place it on the November ballot.For residents, the core takeaway is this: Missouri gave itself a trial run on big tax changes by eliminating capital gains taxes last year. If approved, this next step could be even bigger.Missouri’s experiment could also influence how other states frame their own debates on income taxes, especially as more look to cut or phase out personal income tax. So, stay tuned.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.