The data-center loophole Amendment 5 doesn’t close

By Jason Hancock | Editor-in-Chief

Good morning, and welcome to The Weekender.

There's a television ad making the rounds for Amendment 5, and it would like you to be angry at a hum.

“That hum is the sound of big tech making money from online gambling, from porn,” a narrator says over footage of server racks. Data centers, the ad goes on, are “money machines making millions every minute,” shielded by a “1917 tax code” that lets them “get away tax free.”

Pass Amendment 5, the Missouri Promise PAC ad promises, and the state fixes the big-tech loophole.

It’s a tidy story. It’s also misleading in most of the places that matter.

Start with 1917. The year does mean something in Missouri tax history — it’s when the state adopted the individual income tax.

It has nothing to do with data centers.

The tax break the ad is furious about was born in 2015, when the Republican-controlled Legislature passed Senate Bill 149. The bill created state and local sales and use tax exemptions for qualifying data center projects, including computer equipment, construction materials and utilities such as electricity.

It wasn't quite the blank check the ad implies, either. SB 149 required a new facility to invest at least $25 million and create at least 10 jobs paying 150% of the county average wage. It also capped the exemption at the state's projected net fiscal benefit.

You can argue that math came out generous. You can’t argue it was a century-old accident.

Among the senators who backed the bill was a Republican from Jefferson City named Mike Kehoe. He runs the state now.

But the loophole the ad presents as a relic of a hundred-year-old code is actually a recent decision by Missouri's Republican leadership, including the man who now sits in the governor's office and is Amendment 5’s biggest cheerleader.

And that same governor has spent recent months celebrating major data-center investments as proof of the state's economic momentum — among them a $1.4 billion Metrobloks campus near Kansas City that will draw on the very sales-tax exemption at issue.

The ad holds up the data center break as proof voters should hand lawmakers broader power to rewrite the tax code. It is better read as proof of what lawmakers do with that power once they have it.

Then there's the question of what Amendment 5 itself would do to that loophole.

Amendment 5 does not repeal the data center exemptions. As my colleague Rudi Keller reported, whether those purchases stay tax-free would still be up to the Legislature — the same body that wrote the break and has not undone it.

A campaign is running against big tech to sell a plan to swap the income tax for an expanded sales tax, and the loophole it vows to close isn't on the ballot. The villain in the ad — the humming server farm getting rich off porn and gambling — keeps its tax break no matter how the vote turns out in August.

None of this settles whether the state should be handing sales tax exemptions to data centers. That's a fair fight, and a live one as server farms multiply across Missouri (like many other parts of the U.S.), straining the grid and water supply.

It is also fair to debate whether Missouri should tax income at all. Supporters say it punishes work and slows growth. Opponents say replacing it with an expanded sales tax leans harder on people who spend most of what they earn. Those are real arguments.

Voters can make up their minds about phasing out the income tax. They ought to get to do it on the merits, not on the promise of closing a loophole the measure leaves wide open — and that the people who built it never meant to close.

The hum, for what it's worth, will keep humming.

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