Establishes the "Fair Tax Act of 2025" which replaces the state individual and corporate income tax and the estate tax with a fair tax based on all new retail sales and services
HB5 establishes the “Fair Tax Act of 2025” and proposes a major restructuring of Missouri’s tax system beginning with tax years on or after January 1, 2028. The bill would eliminate state taxation of income from any source and replace the lost revenue with a new statewide tax on the use or consumption of taxable property, goods, and services. The proposed sales/use tax rate is 5.11%, and the bill authorizes the General Assembly to make one later adjustment if needed to keep revenue neutral.
The bill specifies that the new system would replace withholding taxes, individual and corporate income taxes, corporation franchise and bank franchise taxes, estate taxes, and all other state taxes on income, along with related income- and sales-tax exemptions and deductions. It also directs the Department of Revenue to create a monthly sales tax rebate for qualified families, with the rebate tied to federal poverty guidelines. The measure includes rulemaking authority for the department and a nonseverability clause affecting that authority.
Because the bill amends state tax law through a constitutional-style policy change but is submitted as a referendum, it would not take effect unless approved by Missouri voters at the November 2026 election. The official ballot language frames the proposal as eliminating individual and corporate income tax and estate tax, creating a single revenue-neutral sales tax on new purchases of goods and services, and providing monthly rebates to families.
The overall sentiment in the available materials is neutral to supportive in the sense that the bill is presented as a comprehensive tax reform proposal, but there is no recorded committee debate or vote history in the provided context to show broader legislative support or opposition. The bill’s structure suggests a strong policy preference for shifting Missouri’s tax burden from income to consumption, which is likely to be the central point of public and legislative discussion.
The main point of contention is the scale of the tax shift: supporters would likely emphasize simplification, elimination of income taxes, and family rebates, while critics would likely focus on whether a 5.11% sales tax can truly replace lost revenue, how the rebate system would work, and whether the change would be regressive for lower- and middle-income households. The bill also raises administrative and constitutional concerns because it requires new revenue calculations, rebate implementation, and voter approval before becoming effective.
HB5 would substantially amend Missouri’s tax code by repealing state income-based taxation and estate taxation in favor of a new consumption-based tax on taxable goods and services. It would affect Chapter 144, RSMo, and would require the Department of Revenue to administer monthly rebates for qualified families, while also changing or eliminating several related tax provisions and deductions. If approved by voters, the measure would reshape state revenue collection and likely require significant administrative changes across tax withholding, corporate taxation, estate administration, and sales tax systems.
The available record shows no committee transcript and no voting history, so there is no documented floor or committee sentiment to measure. Based on the bill text and caption, the proposal is framed as a major tax reform initiative intended to simplify the tax code and shift taxation away from income. In the absence of recorded debate, the bill’s apparent posture is that of a policy-driven reform measure rather than a narrowly contested technical amendment.
The likely areas of contention are the elimination of individual and corporate income taxes, the replacement of those revenues with a 5.11% sales tax, and the promise of revenue neutrality. Critics would likely question whether the new tax base is broad enough, whether the monthly family rebate adequately offsets the burden on lower-income households, and whether the state can maintain stable revenue under the proposed system. Supporters would likely argue that the bill simplifies taxation, removes income tax burdens, and provides a more transparent consumption-based system. The bill’s requirement for voter approval and its complex implementation details also make administration and fiscal forecasting likely points of dispute.