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HB 2690

Establishes the "Fair Tax Act of 2026" which replaces the state individual and corporate income tax and the estate tax with a tax based on all new retail sales and services

2026 Regular Session Introduced by Darin Chappell and 1 co-sponsor

A 5.11% statewide sales tax would replace income and estate taxes, with monthly poverty-guideline rebates to qualified families and a revenue-neutral adjustment if revenue differs.

Referred: Emerging Issues(H)
#revenue #departmentof #taxationandrevenue-general #taxationandrevenue-income #taxationandrevenue-salesanduse
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WeVote Research Nonpartisan
Bill Summary · HB 2690

Quick overview

  • Bill: HB 2690
  • Session: 2026 (Missouri)
  • Purpose: Establish the Fair Tax Act of 2026, replacing Missouri’s individual and corporate income tax and estate tax with a statewide sales/use tax of 5.11% on new purchases of goods and services, with a monthly rebate for qualified families. Referendum required for adoption.
  • Status: Introduced; referred to Emerging Issues (H). Referendum date set for November 2026 election.

What the bill would do

  • Replace taxes
    • Beginning January 1, 2028, Missouri would no longer impose income tax on any income from any source within the state.
    • The following taxes would be repealed:
    • Withholding taxes and individual and corporate income taxes
    • Corporation franchise and bank franchise taxes
    • All tax exemptions and deductions related to income and sales taxes
    • The estate tax
    • All other state taxes on any source of income
  • New tax system
    • A single sales/use tax would be imposed on all use or consumption of taxable property or services in the state.
    • Initial rate set at 5.11%.
    • The General Assembly may enact one adjustment after the revenue impact is calculated, to ensure revenue collected equals revenue lost due to the income tax repeal.
  • Revenue neutrality mechanism
    • The adjustment is designed so that the state’s revenue remains equal to the amount lost by repealing income taxes.
  • Sales tax rebates
    • The Department of Revenue would design a method to provide a monthly sales tax rebate to each qualified family.
    • The rebate amount would be: (sales tax rate) × (1/12 of the annual federal poverty guidelines, as updated by the federal government).
    • Rebates would be distributed on or before the first business day of the month for the month the rebate applies.
  • Administration and legality
    • The Department of Revenue may promulgate necessary rules and regulations for implementing the act.
    • Rulemaking would follow existing Missouri administrative law requirements (Chapter 536), with nonseverability provisions tying the act’s rulemaking to those standards.
  • Referendum and effective date
    • The act is submitted to Missouri voters for approval at the November 2026 election.
    • If approved by a majority, the act becomes effective as specified (generally upon voter approval).

Who would be affected

  • Taxpayers:
    • Individual residents and businesses would no longer pay Missouri income tax (including withholding).
  • Tax system:
    • The estate tax and various income-related exemptions/deductions would be repealed.
    • A new 5.11% statewide sales/use tax would apply to new purchases of goods and services in Missouri.
  • Families:
    • Qualified families would receive a monthly sales tax rebate calculated based on poverty guidelines, intended to offset tax burdens from the new system.
  • Government agencies:
    • Missouri Department of Revenue would administer the new tax and rebates, including rulemaking and monthly rebate distributions.

Key details to note

  • Tax rate: 5.11% sales/use tax on new purchases and services.
  • Revenue neutral design: one potential adjustment to align revenue with lost income tax revenue.
  • Aid to low-income families: monthly rebate tied to federal poverty levels.
  • Only if voters approve: The measure requires a referendum and would become law only if approved in the 2026 election.
  • Effective date: The bill indicates an effective date upon voter approval; the income tax repeal would apply to years beginning in 2028, with the administrative changes implemented beforehand as needed.

Potential implications to monitor

  • Revenue stability: Transition to a single sales tax depends on consumption patterns and may be sensitive to economic cycles.
  • Regressivity/progressivity: Replacing income tax with a sales tax could affect lower-income households differently, hence the rebate design; the adequacy and administration of the rebate are critical.
  • Administrative complexity: Implementing a new tax base, exemptions, and rebate system would require substantial regulatory rollout by the Department of Revenue.
  • Transitional rules: How existing tax obligations, exemptions, and credits are treated during the transition period (pre-2028) will be important for taxpayers and businesses.

Summary

HB 2690 seeks to abolish Missouri’s income and estate taxes and replace them with a 5.11% sales tax on new purchases, coupled with a monthly poverty-guideline–based rebate to qualified families. The proposal is constitutionally contingent on voter approval in the 2026 election and includes a revenue-neutral mechanism to adjust the tax rate if revenue deviates from the amount lost by eliminating income taxes.

Compiled from official sources — confirm details with the bill’s official record.

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