What Happens to Local Taxes Under Amendment 5?
Most of the attention around Amendment 5 has focused on the income tax.
That makes sense. Amendment 5 would put Missouri on a path toward eliminating the state income tax. The measure would phase out Missouri’s individual income tax based on revenue growth, and once the rate reaches zero, the state could not reimpose it.
But Amendment 5 also raises an important local tax question:
If Missouri modernizes its sales tax base, do local governments get to keep the extra money?
The answer is no.
Amendment 5 includes a no-windfall rule for local governments that impose sales and use taxes.
If the state broadens the sales tax base to include more transactions, local sales taxes applied to that broader base could generate additional local revenue. Amendment 5 says local governments don’t get to keep that money, they have to use it to lower taxes.
Beginning January 1, 2029, any political subdivision that imposes a sales and use tax would have to make annual adjustments to reduce revenue by an amount “substantially equal” to the additional revenue produced by a sales and use tax base expansion authorized under the amendment.
Put simply: if a local government gets extra money because the sales tax base expands, taxpayers must get relief through lower local tax rates.
Which local tax rates could be reduced?
Amendment 5 gives local governments a few options.
They could reduce:
- – the local sales or use tax rate;
- – the operating levy for personal property tax;
- – the operating levy for residential real property tax;
- – a general property tax operating levy; or
- – an earnings tax rate.
Amendment 5 does not guarantee that every local government will cut property taxes first. But it does put property tax relief directly on the table. It also prevents local governments from treating a sales tax base expansion as free money.
Why does this matter?
Missourians have spent years watching property tax bills climb.
They know how quickly local governments can absorb new revenue and call it normal. Amendment 5 puts a taxpayer protection in the Constitution.
If the state reforms the tax code, local governments do not get a blank check.
They have to return the benefit through lower local tax rates.
That implementation will matter. But the constitutional instruction is clear: local governments cannot treat the added revenue as free money.
What about public schools?
Amendment 5 also includes a public school funding guardrail.
The amendment says no county or political subdivision may make the required local tax adjustment in a way that reduces funding to public schools within, or serving, that community.
Amendment 5 is not going to bankrupt public schools.
The bottom line
Amendment 5 eliminates the state income tax while making sure local governments cannot quietly pocket extra revenue created by a broader sales tax base.
Tax reform should mean tax relief.
Amendment 5 locks that principle into the Constitution.
Andy Bakker
Executive Director
Liberty Alliance USA