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
The implementation of HB 821 is expected to shift the tax burden from income tax to consumption tax, fundamentally altering how revenue is generated for state funding. Supporters argue that this will stimulate economic growth by encouraging spending rather than taxing income. They believe it would simplify the tax code and promote fairness by equally applying the sales tax to all citizens, regardless of income level. However, there are concerns that this regressive tax structure could disproportionately affect lower-income households, who spend a larger portion of their income on consumption compared to wealthier individuals.
House Bill 821 introduces the 'Fair Tax Act of 2025', proposing a significant overhaul of Missouri's taxation system. The bill aims to replace individual and corporate income taxes, as well as the estate tax, with a single sales tax levied on the sale or consumption of goods and services. Set to begin from January 1, 2028, the proposed sales tax rate is 5.11%, which is intended to be adjusted by the General Assembly to ensure revenue neutrality. The legislation introduces a monthly sales tax rebate for qualifying families, intended to support those impacted by the removal of income taxes.
HB 821's success hinges on its approval by Missouri voters in the 2026 election, presenting a unique challenge for its advocates. They must educate the electorate on the proposed benefits while addressing the challenges and public fears associated with a shift in the state's tax structure. The referendum aspect signifies the importance of public support for enduring legislative changes, especially ones as pivotal as the tax overhaul presented in HB 821.
Dissenting voices in the legislative discussions have raised points about the potential pitfalls of such a drastic tax reform. Critics emphasize that eliminating the income tax could erode vital funding for public services that are heavily reliant on income tax revenues. The bill stipulates that the new tax system must result in no net loss of revenue; however, skeptics question whether sales taxes can adequately replace the lost funds without causing budget shortfalls in essential services. Additionally, the need for a referendum to approve the changes has sparked debates regarding voter awareness and understanding of the implications of the bill.