Understanding Amendment 5: A Risk Assessment for Our Community

As the Director of Advocacy for PreventEd, I spend a significant amount of time evaluating how state fiscal policies impact our community’s essential services. Amendment 5 proposes a fundamental shift in how our state operates, outlining a constitutional framework to phase out the state individual income tax by authorizing an expanded state and local sales and use tax base. While the intent to lower the tax burden for Missourians is a goal many can understand, evaluating a constitutional amendment requires looking beyond its overarching promise. From a policy and health advocacy perspective, this assessment examines how the amendment’s legislative ambiguity could force significant, unintended fiscal consequences onto our local communities.

Because the state individual income tax historically accounts for 64% to 68% (~$8.5 billion to $9.17 billion annually) of Missouri’s General Revenue, replacing this funding solely through consumption-based taxes represents a major structural shift. The text leaves key implementation details, specifically which services will be taxed and at what rates, to future legislative sessions. This creates two distinct vulnerabilities for state-funded programming:

• Rate-Driven Suppression: If future legislatures establish high sales tax rates to meet the revenue benchmarks required to fully eliminate the state income tax, it risks suppressing overall consumer spending, the very economic activity required to generate state revenue.

• Base-Broadening Volatility: If the tax base is instead expanded broadly across currently untaxed sales and services to keep rates lower, state revenue becomes significantly more sensitive to economic cycles. We can already see this vulnerability: Missouri’s net general revenue collections decreased by nearly 3% this past fiscal year, with steep drops of roughly 10% to 11% in the final months. Because consumer spending naturally contracts during economic downturns, replacing a stable income tax with an expanded sales and use tax increases the probability of even larger state budget shortfalls during these periods. This would directly threaten the continuity of state grants for mental and behavioral health services.

The amendment introduces similar uncertainties at the local level through its mandatory “right-sizing” provision. This requires political subdivisions to reduce local tax rates to offset 97% of any new revenue generated by an expanded sales and use tax base.

Crucially, because the amendment explicitly protects only public education from these local offsets, all other dedicated civic funds are exposed. Because every political subdivision has the discretion to decide how it satisfies the 97% offset, implementation will vary widely across the state:

• Property-Tax-Dependent Funds: Entities supported by dedicated property tax levies, such as Community Mental Health Boards and Developmental Disability Boards, face structural exposure if a local governing body chooses to reduce property tax rates to fulfill the mandate, resulting in a permanent revenue reduction.

• Sales-Tax-Dependent Funds: Entities funded by fractional sales taxes, such as county-level Children’s Service Funds, risk operating on permanently diluted tax rates. If a political subdivision lowers a dedicated sales tax rate to satisfy the offset, the fund becomes significantly more vulnerable to revenue drops during future economic downturns.

The Bottom Line:

While the core intent of Amendment 5 is to offer income tax relief by fundamentally restructuring how Missouri funds its government, a shift of this magnitude inherently introduces a two-front fiscal risk to our behavioral health safety net. At the state level, transitioning away from a more stable income tax leaves our General Revenue highly susceptible to economic downturns. At the local level, the mandatory 97% offset, designed to prevent taxpayers from being overburdened by new sales taxes, is a statutory mandate requiring sweeping local offsetting tax cuts. This will likely force local leaders to make tough decisions that risk permanently diluting the dedicated local funding streams our community relies on.

While no local fund or state grant faces an imminent cut the day the amendment passes, depending on how this phase-out and revenue offset are implemented at state and local levels, it does introduce a real possibility of substantial long-term financial risk. The if-then scenarios outlined represent structurally grounded, realistic possibilities created by the amendment’s lack of statutory guardrails.

High-level political messaging often highlights the overarching pros and cons of an amendment, promising to “reduce your taxes and put your money back in your pocket” or warning that it “increases the unaffordability of everyday life and harms our communities most vulnerable.” However, these simplistic messages rarely tell you how the policy actually works, leaving voters without the facts needed to make a fully informed decision. As you head to the polls on August 4th, my goal is to ensure our community is armed with these little-discussed provisions. Understanding these underlying mechanics allows every voter to fully evaluate the long-term impacts this proposed shift could have on the essential community services and local resources they prioritize most.