These are the notes that folks requested from the Lawrence County Ballot Proposition Information Meeting last night (28 July 2026). My notes from Amendment 4 have also been posted. For this set of notes, I have to start out by explaining the physical demonstration a little bit, or, you could just watch it, link below.
Also see my Hancock Amendment self-guided tour.
Water and Pitcher Model For Tax Base: Save the Chicks!
I started my portion of the presentation with a physical model demonstrating tax base vs tax rate and necessities exemptions. These are features of tax policy that are hard for many people to envision. I, myself, often need to think about liquids and volumes. This is what started the back-of-the-envelope sketch that got borrowed by Carl Bearden for a revision of his white paper
The video of the demonstration was shared on Facebook. The demonstration itself happens in the first few minutes and then it continues with the resulting discussion between myself (as Mount Pleasant Committeeman), Committee Chairman Dane Roaseau (LCRCC), State Representative Mitch Boggs (R-157), and State Representative Darin Chappell (R-137). The video was recorded and shared by the Roaseaus.
- The colored water represents the income tax revenue that needs to be replaced.
- This is a fixed volume.
- If we pour the water into a narrow container (the tall graduated cyllinder in the video), the water level will be high.
- A narrow sales tax covering fewer things requires a higher rate to make revenue.
- If we pour into the wide bin instead, the water level will be much lower: volume = base x height
- A wider sales tax (covers more things) gathers the same revenue at a lower rate.
- Missouri's sales tax only covers about 30% of the consumer economy, partly because many goods which used to be taxed (think about records and entertainment) have moved to digital services.
- This is why Amendment 5 sets the stage to widen the sales tax base: it lets the sales tax rate remain reasonable.
Add Rocks
If you set out a trough of water for chicks or ducklings, the young birds will often get stuck in the trough and drown. To save the chicks, add rocks. When you add rocks, two things happen:
- The rocks give the young birds something to stand on to avoid drowning and hop back out.
- The water level is raised slightly.
This is the same way that necessities exclusions (like groceries) in sales tax work:
- They give people a shelter to provide the basics without tax (people don't drown).
- They raise the tax rate slightly for everyone.
- The more exclusions get dropped in the tax code, the higher the water rises.
Ballot Language and Amendment Text
The ballot language and the full amendment text can be found on the Secretary of State's Website. I do not ever recommend that anyone decide whether to support a constitutional amendment from the ballot summary alone, no matter who writes it.
What It Does
- Sets up a mechanism to phase out and permanently remove the income tax via revenue growth.
- Authorizes the MO GA to widen the sales tax base OR adjust rates within a five year period to replace income tax revenue.
- Sets limits on tax adjustments to be revenue neutral in the same bill.
- Leaves Hancock (18 and 18(e)) protections in place before, during, and after the five year period.
My Analysis
- Strongly prudent and conservative approach on several fronts:
- Splits framework that belongs in the Constitution from policy to be decided by the GA.
- Fault-tolerant: Does not assume that revenue projects will be correct (what happened to Kansas) and reduces income tax based on actual revenue.
- Allows a five-year period to negotiate and implement incrementally.
- Any problems encountered can be fixed in statute, by IP (regardless of Amendment 4), or referendum.
- Once gone, income tax stays gone (absent another amendment).
- The Missouri economic numbers show that a consumption tax + normal economic growth can replace income tax here.
- Missouri is 46th in the nation for per capita tax burden (only 4 states lower burden).
- 9 states have no income tax and 16 are heading in the same direction.
- None of those have obnoxious sales tax rates like opponents are predicting as nightmare scenarios.
- Missouri sales tax only covers about 30% of the consumer economy.
- Kehoe (backed by the MO Auditor and economist Aaron Hedlund, etc), suggests expanding the tax base to cover about 2/3 of the consumer economy.
- Will cover most of the income tax revenue.
- Leaves generous carve outs for necessities.
- Commitment that will not touch
- Medical (federal law restricts state taxes anyway)
- Agriculture
- Real-estate
- And it is widely accepted (Governor, legislators) that the grocery tax can be eliminated.
- This would end up with a tax rate between 5-6%, slightly-reduced local rates (windfall), and the remainder of the income tax eaten up by growth.
- Carl Bearden (June 2026) also wrote a white paper that presents a model for a potential tax structure.
- Not important to agree with his ideas or numbers.
- Shows that numbers work and gives detailed starting point for exploring options.
- Consumption tax produces more stable revenue than income tax; wide and shallow is more stable than narrow and deep (see: (Bearden June 2026 p12).)
- Darin Chappel's FairTax proposal is in play as a package solution.
- Many people warn that all of these tax changes can be done without a vote after Amendment 5, but that is based on a mistaken understanding of what the Hancock Amendment already allows.
- Predictions that we will have a wide and deep consumption tax not credible:
- revenue neutrality prohibits.
- No income-tax-less state has gone that route.
- Hancock still prevents creep past elimination of income tax.
- Same goes for the GA not limiting grocery tax, providing core exemptions: it would be political suicide for no apparent reason.
- Providing necessities exemptions for low-income Missourians is straight-forward.
- People have choices about how/when to pay tax;
- In any case the rich consume more goods and services than the poor.
- Kansas style budget crisis is avoided by the framework.
- There is no double taxation
- the only way the income tax remains is if the consumption taxes fail to generate revenue.
- Taxes on real-estate sales. Already prohibited elsewhere, anyway excluded by definition of "goods" in law.
- Economic catastrophe causes revenue crisis
- If we do have an economic catastrophe, an income tax is the least stable revenue source; Staying with status quo would be worst choice.
- No agreement on a plan within five years.
- Technical problem not that hard; human problem is real.
- Free-rider and holdout problem with exemptions could:
- Tank agreement.
- Sap revenue to shrink income tax.
- Industry-specific carve-outs for consumption tax can corrupt wide and shallow.
- GA could be too aggressive, not staging changes.
- Changes do not meet revenue targets or growth takes longer than expected to develop.
- Bearden June 2026
- Bearden, C. (2026). Revenue-neutral Tax Reform Sales Tax Base and Rates Model. https://www.dropbox.com/scl/fo/ofwcwlhya9twmsfb8wos6/AOMoWqWH17DJ8ZTQZ60yQ70/Missouri%27s%20Roadmap%20to%20an%20Improved%20Economic%20Future/Revenue%20Neutral%20Tax%20Reform%20-%20Suggested%20Sales%20Tax%20Base%20and%20Rates%20Model_V2.pdf?rlkey=6o9bxqbra2rhilkm0lcf08i4r&dl=0
- Jansen 2019
- Jansen, D. W. (2019). What Happened In Kansas: the 2012 Tax Reform, the Economy, and the Lessons for Us All [Technical report]. Show-Me Institute. https://showmeinstitute.org/wp-content/uploads/2019/10/20190722%20Kansas%20Tax%20Reform%20-%20Jansen.pdf
- Tsapelas 2019
- Tsapelas, E. (2024). MISSOURI ’ S HANCOCK AMENDMENT : A PRIMER [Technical report]. Show-Me Institute. https://showmeinstitute.org/wp-content/uploads/2024/04/20240306-Tsapelas-Hancock-Amendment.pdf
Possible Dangers
Unlikely Things People Throw Out
Most detractor nightmare scenarios are not credible:
More Likely Problems
But, there are some real potential problems. The biggest ones are:
On the Balance
All of these, however, are survivable and correctable. In the case of economic catastrophe, a transition to a wide and shallow consumption tax would be exactly what we would want.
As the Mises Institute pointed out after the Kansas failure, lower taxes (esp income tax) does generate growth, but growth does not immediately equate to revenue. Tax reduction primarily spurs savings and investment (reinforced here by consumption tax) and only secondarily generates revenue. Actual performance of the taxes depends on peoples' choices, inherently unpredictable.
But this is not really a big problem because the measure is built to reduce income tax as revenue is generated. There is no hard cap to force a budget crisis like Kansas. Even in the case of Kansas, as pointed out in (Jansen 2019), Kansas made every possible mistake, but it was still correctable and did no detectable long-term economic harm. They ended with a hybrid system: a reduced income tax (stepped back up a touch from the 2012 cuts) and an increased sales tax, overall moderate.
As for the corruption in carve outs, this is the most realistic problem. It is not, however, any different from what we have with income tax and is likely to be somewhat better by at least providing an opportunity to clean out decades of exceptions. This is almost certainly has many of the special interests panicked.
If no agreement can be reached, the income tax still goes away. The biggest downside would be not updating the sales tax base and making it long-term stable.
Hancock Amendment
Many of the misconceptions on Amendment 5 come from misunderstanding the Hancock Amendment. (Tsapelas 2019) provides a detailed history and reference on Hancock's benefits and problems. The Hancock Amendment is a critical piece of the Missouri Constitution. Understanding how it works is important beyond Amendment 5.
I have also provided an experimental AI-based self-guided tour of the Hancock Amendment.
Conclusion
Amendment 5 presents a significant opportunity to get rid of income tax. The need to have the General Assembly agree on a sales tax plan presents risks, but no extraordinary risks that do not already exist. The General Assembly already has significant power to rearrange taxes under the Hancock Amendment without a vote.
