The Missouri legislature on Wednesday passed a wide-reaching tax bill that includes ending the capital gains tax.
The House passed the legislation 102-41. Since it had previously been approved by the Senate, it now goes to Gov. Mike Kehoe.
Rep. George Hruza, R-St. Louis County, said this is one of the best things the legislature could do for Missouri.
"It will encourage companies to invest in Missouri, and it will also encourage reinvestment of existing companies to grow and bring high-paying jobs to Missouri," Hruza said. "It also will benefit most Missourians in their pocketbook, so they get to keep more of their money."
Through the legislation, Missourians would be able to deduct 100% of income reported on their federal returns as a capital gain from state income taxes on an individual level.
The change would be applicable for the 2025 tax year and beyond.
Additionally, the bill creates a trigger that would allow for a 100% deduction of income reported as a capital gain for corporations. If the top rate of the state income tax reaches a level that is equal or less than 4.5%, that would then trigger that deduction the following tax year for corporations.
Capital gains taxes occur with the sale of assets like stocks and bonds as well as land. According to federal law, long-term capital gains are defined as assets held for more than a year.
Some House Democrats disagreed with Republicans on the legislation, saying eliminating the capital gains tax would only help the wealthiest Missourians.
"Missourians do not want this. And the way that you all are going to phrase this is, that we cut taxes for you. You only did it for a certain amount of people, and that was it," said Rep. Emily Weber, D-Kansas City.
According to the state's fiscal note on the legislation, the bill could cost Missouri almost $430 million for the fiscal year that begins on July 1.
It's also expected to cost the state around $350 million annually in subsequent years. The costliest portion of the bill is the capital gains tax elimination.
Property, diaper and feminine hygiene tax breaks
The legislation includes tax policies that have larger bipartisan support.
One of those is a tax credit that would help qualifying Missourians stay in their homes.
Also known as a circuit breaker, it provides a tax credit for low income seniors and people with disabilities that goes toward their property taxes.
The credit applies to both people who own their homes as well as those who rent.
Brian Colby, with the Missouri Budget Project, said the program hasn't been updated since 2008.
"This one finally modernizes, increases the amount of the credit, increases the amount of income a person can have, and then attaches that to inflation with the CPI [Consumer Price Index] adjustment," Colby said. "So it will rise as inflation rises in the future, we won't have the problem of it getting kind of too old or too limited."
The legislation also eliminates the state sales taxes on feminine hygiene and incontinence products, also known as a pink tax.
Additionally, it eliminates state sales taxes on diapers.
Rep. Wendy Hausman, R-St. Peters, said this will help women and families across Missouri.
"I can't tell you how many of my own constituents have called my office and said, 'Why are we always paying for this luxury tax for our personal hygiene products?'" Hausman said.
While Democrats have pushed for these policies for years, some House Democrats were unhappy they were on the same bill as the elimination of the capital gains tax.
"I've been in here for seven years, and now all of a sudden, we care enough about people who are on Social Security and poor folks with circuit breakers and pink taxes and everything else, when we've had ample opportunity to pass this year after year," said Rep. Raychel Proudie, D-Ferguson. "But only until it's attached to something that's going to work for rich folks do we care enough about this."
Correction: The tax bill could cost Missouri almost $430 million for the fiscal year that begins on July 1. It's also expected to cost the state around $350 million annually in subsequent years.
An earlier version of this story had an incorrect amount for the subsequent years.
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