"The Voice of Missouri Business®" Weekly Report- March 27, 2026

By Matthew Smith and Ray McCarty

March 27, 2026 - The second half of the 2026 Missouri Legislative Session began this week and there are now seven weeks left in the regular session. Here is a recap highlighting some of our efforts on the highest profile issues on behalf of Missouri employers so far this session.

Governor Kehoe's tax shift/reform (AIM currently opposes, negotiations appear unlikely to provide protections for Missouri businesses)

Topping our agenda for the remainder of the legislative session is revising or opposing Governor Kehoe's tax reform proposal.

The bill asks voters for permission to increase sales and use tax rates and expand the taxes to services for the purpose of eliminating the individual income tax. If approved by voters, the legislature would be given complete authority to increase and expand sales and use taxes as much as needed to offset the $7.75 billion reduction in state revenues that would be caused by the elimination of the individual income tax without requiring any additional voter approval, provided such tax increases are enacted within three years of the effective date of the proposal.

The bill, HCS HJR 173 & 174, sponsored by Speaker of the House Jon Patterson and Rep. Bishop Davidson, was referred to the Senate Economic and Workforce Development Committee this week. Sen. Ben Brown is the Chairman of that committee. A hearing on the bill could be held as early as Wednesday, April 1. Associated Industries of Missouri (AIM) will oppose the bill in the hearing and it appears AIM may be the only statewide business advocacy group that will oppose the plan.

After meeting with the Senate handler of the bill, Sen. Curtis Trent, it does not appear supporters of the Governor's plan are willing to provide any protections for Missouri business that we have requested - at least not at this time. Until protections for Missouri businesses are provided and changes made to allow the vast majority of Missouri businesses that are organized as pass-through entities to enjoy the tax reduction and elimination, Associated Industries of Missouri will remain opposed to the plan.

Supporters of the bill say the bill does not increase taxes and that it simply asks voters if they would like to allow growth in revenues to gently reduce the individual income tax rate until it is eliminated. However, that is a clever play on words. The bill authorizes the legislature to increase and expand sales and use taxes as much as is necessary to eliminate the income tax, but a separate bill in a future session would contain the actual tax expansion and increases. Section 26.2 of the bill states:

"Notwithstanding any provision of this Constitution to the contrary, including the foregoing, for the purpose of reducing and eliminating the state individual income tax and reducing local tax rates, state and local sales and use taxes, or any similar transaction-based tax may be expanded by legislation to impose taxes on transactions involving any goods and services."

Replacing the income tax would require $7.75 billion. For a point of reference, state revenues only increased $4.7 billion in the 10 year period from 2015 through 2025, so it is unreasonable to believe growth in state revenues alone would be sufficient to replace the revenue that would be lost from elimination of the individual income tax within three years.

The ballot language voters will view is currently very misleading. It asks voters if the Missouri Constitution should be amended to phase out and eliminate the income tax, reduce local property taxes, reduce local sales and use taxes, modernize the sales tax, and protect school funding. Because the proposal does not inform voters a vote in support would authorize the legislature to pass any combination of tax increases and new taxes on any goods and services for a three-year period without voter approval, the measure may pass at the polls. The message to taxpayers from their elected officials who support this plan: "Trust us."

Businesses, including small businesses and farmers, are completely excluded from the income tax rate phaseout and elimination, despite our efforts to include them. Existing sales tax exemptions are at risk. Corporations and other businesses are concerned the responsibility of funding state government will be shifted to businesses and away from wealthy taxpayers.

Also, while supporters say Missouri is not keeping up with states that have no income tax, Missouri is already VERY competitive with these other states. Read more HERE and HERE.

HCS HJR 173 & 174 is a high priority for Governor Mike Kehoe. He first mentioned his support of the idea in his State of the State Address in January. Associated Industries of Missouri is currently the only business advocacy organization taking a stand against the bill, but we remain open to negotiating in good faith, as we have since the beginning of the session, in hopes of arriving at a compromise that protects Missouri businesses.

Legal reform (AIM supports)

Two AIM legal reform priorities advanced this week.

We told you in previous reports about legislation that protects businesses from frivolous lawsuits in which trial attorneys claim business websites violate the Americans with Disabilities Act (ADA). Of course, this is just another way for these trial attorneys to target businesses for the sole purpose of gaining monetarily from the situation. SCS SBs 907, 1154 & 1272 (Sen. Hudson) received bipartisan support and was passed unanimously by the Missouri Senate this week. The bill moved to the House and was referred to the House Commerce Committee. HB 1694 (Rep. Christensen) on the same topic was heard this week by the Senate General Laws Committee.

SB 1234 (Sen. Trent) was also heard in the Senate General Laws committee. This bill clarifies that businesses cannot be sued for a product they did not manufacture. Some businesses, most apparent in the pharmaceutical industry, are being sued for products they did not manufacture, because the product is similar to their product. For example, someone who manufactures a name brand drug could be sued for injuries that occurred because of a generic drug that was not manufactured by them.

The next step for this bill is for it to be voted out of committee and placed on the Senate calendar for debate.

Workers' Compensation Reform (AIM supports)

HB 2375 (Rep. Christ) strengthens Missouri’s workers' compensation by requiring an injured employee to prove the injury and the need for medical treatment was caused by work. Some employees receive workers compensation for preexisting conditions or diseases that were not caused by an injury at the workplace. This bill fixes that issue, along with making needed changes to the appeals process and requiring credit for any insurance benefit a worker received when determining compensation due from the employer. This bill was heard this week in the Senate General Laws committee.

Funding the Department of Natural Resources (AIM supports)

SB 953 (Sen. Bean) provides a steady stream of funds to the Air Pollution Control Program by allocating a portion of currently collected sales and use taxes from utility companies to a special dedicated fund that may be used solely to provide funding for the Air Pollution Control Program. The bill also prevents the "sweeping" of such funds into general revenue - a practice that defeats the purpose of having a dedicated fund. The Air Pollution Control Program is essential for providing permits for projects that industries perform in Missouri. If funding for the program is inadequate, permits would be slowed, preventing important projects from being completed. This also would prevent encroachment from the EPA because if the program is not adequately funded, the EPA could take over enforcement. This bill is scheduled for hearing in the House Conservation and Natural Resources Committee on Monday.

We testified against the current draft of SB 1397 (Sen. Henderson), a bill that would remove the cap on water permit fees and stated to the sponsor and committee we support an increase in the fees as determined by stakeholder groups, but not a complete removal of the current $5,000 limit.

Clarifying sales tax treatment of credit card fees (AIM supports)

The Senate gave first-round approval this week to SB 1534 (Sen. Nicola). The bill modifies the definition of “gross receipts” to clearly exclude separately stated credit card transaction fees. Although current law excludes such fees from sales taxation in Missouri, the Missouri Department of Revenue has attempted to tax the fees in business audits. AIM objected to a recent regulation change initiated by the Department of Revenue to accomplish their goal of taxing the fees and the rule was never implemented. This bill would clarify language to ensure such fees are clearly exempt from sales and use taxes. The bill needs one more vote in the Senate before advancing to the House for further consideration.

We intend to provide legislative updates to you on a weekly basis as we track the progress of these and other bills affecting Missouri businesses.