Missouri Governor Mike Kehoe has appealed to the Missouri General Assembly to allow voters to decide whether or not to phase out and eventually eliminate the state’s individual income tax.
In his 2026 State of the State Address, Governor Kehoe said: “The first step is straightforward: gaining approval from Missourians at the ballot box this year. And that’s why I am calling on the members in this chamber to pass a joint resolution this session placing this proposal before voters.”
Why it Matters
The proposal to phase out Missouri's individual income tax—currently accounting for nearly two-thirds of the state’s $13.4 billion revenue, according to The Missouri Independent—marks a transformative shift in how the state would fund essential services in the future.
Kehoe claims this move would enhance Missouri's competitiveness and economic growth, but opponents argue that it could result in underfunding public services and increasing the tax burden on lower-income residents.
What to Know
In his January 15 address, Kehoe argued that Missouri's current tax structure leaves it lagging behind states like Tennessee and Texas, which have no state income tax: "When we’re competing against states like Tennessee and Texas, states with no individual income tax, too often the conversation ends before it truly begins.”
Kehoe proposed a plan to gradually phase out the state’s individual income tax over five years, replacing lost revenue by broadening the sales tax base to include digital services and subscriptions.
Although Kehoe did not provide full details on how lost revenue would be replaced, stating, “Once voters approve this measure, I look forward to working with the General Assembly next session to carry out the will of the people and put this plan into action, " he did emphasize that any sales tax expansions would exclude agriculture, health care, and real estate services.
His proposal requires the Missouri General Assembly to place a constitutional amendment on the ballot because, under a 2016 amendment, only voters can approve new types of taxation, The Missouri Independent reports.
What Mike Kehoe Said Relating to Income Tax in His Address
“Missouri brings real strengths to the table when recruiting jobs and investment. But when we’re competing against states like Tennessee and Texas, states with no individual income tax, too often the conversation ends before it truly begins.”
“The issue at hand here is competitiveness. And competitiveness starts with our tax code.
Missouri’s tax structure must evolve.”
“If we are serious about building a foundation for growth, to compete rather than be complacent, then we must begin the work now to phase-out and eliminate Missouri’s individual income tax.”
“We can do both. We can maintain a balanced budget that supports essential services and pursue a tax policy that improves Missouri’s competitiveness.”
“The first step is straightforward: gaining approval from Missourians at the ballot box this year. And that’s why I am calling on the members in this chamber to pass a joint resolution this session placing this proposal before voters.”
“The question before Missourians will be clear: Should Missouri begin a phased elimination of the individual income tax, with a full repeal within the next five years.”
“Our plan pairs tax relief with closing loopholes. Today, much of our commerce happens through monthly subscriptions and digital services like online advertising, e-books, and AI platforms that fall outside our current sales tax base. Their billionaire owners don’t pay.”
“Our plan includes safeguards to ensure fiscal responsibility and protect against economic downturns, by requiring triggered reductions to the income tax rate.”
“Eliminating the income tax is not about runaway sales taxes.
And I will never support extending sales taxes on agriculture, healthcare, or real estate. Period.”
“This is the people’s money, and they can spend it better than politicians.”
“Missouri has already seen success from cutting taxes so far. Just last year, we were proud to support a historic elimination of the income tax on capital gains.”
“Some critics and members of the media will claim that tax cuts put us in a bad budget situation. I disagree. The folks who say that just want to spend more of your money. I will never apologize for putting money back in the pockets of hardworking Missourians.”
What the opposition is saying
According to The Missouri Independent, House Minority Leader Ashley Aune said that replacing the income tax with an increased and expanded sales tax would be: "One of the largest and most devastating tax increases in state history. Most Missourians would get smacked with a massive tax increase to pay for yet another unwarranted tax cut for the rich.”
What Happens Next
If voters approve the measure, lawmakers will be responsible for developing the details of how to phase out the income tax while safeguarding essential services and preparing for potential fiscal risks. The debate is expected to intensify, focusing on the balance between tax relief, revenue stability, and fairness across income groups.