In Missouri, people who make money from selling things like stocks or houses might soon not have to pay tax on that money.

A new law, approved on Wednesday, would stop the tax on profits from selling things for people this year. If the state gets more money, this tax could even go away for companies later. The new law will now go to Governor Mike Kehoe, who is a Republican. He said he likes the idea a lot.

Some people think this will help the economy. But others say that stopping this tax will mostly help rich people. They also say it will mean less money for schools and public services. The politicians in charge were able to pass the law, even though others didn't like it. They added more tax help for older people and people with disabilities. They also stopped the sales tax on things like diapers and products for women.

Missouri is cutting its income tax in a special way. At the same time, other states led by Republicans are making more common income tax cuts. Also, the US government is thinking about continuing and making bigger tax cuts that started when Donald Trump was president.

What is a tax you pay when you sell something for more money than you paid for it?

When you sell things like stocks or property and make money, that money is called a capital gain. If you kept the item for more than a year, the government takes less tax from this money than from your normal income.

In Missouri, when you sell things like stocks and make money, the tax on that money is the same as the tax on the money you get from your job.

Some states with Democratic leaders are doing the opposite. For example, Maryland recently made a law to add a small tax on big profits from selling things like stocks for people who earn more than $350,000. Washington also recently made a law to add another tax on these profits if they are over $1 million. Minnesota already has an extra tax on these profits and other money from investments if they are over $1 million.

Why should people not pay tax when they sell things like houses or company shares for more money than they paid?

Some people want to stop the tax on money made from selling things. They say this tax makes people not want to invest. They also say it makes people keep their things instead of selling them and spending the money in other ways.

Jonathan Williams said that if you tax something, people will do less of it. He said that states want businesses to invest more money in their state.

A group called ALEC has wanted to end a state tax on money made from selling things for a long time. But a politician named Chad Perkins said he thought of stopping this tax last year. His friends from a building company gave him the idea because they had to pay the tax. He said his plan to stop the tax could also help families who own farms and want to sell their land.

Republican state Senator Curtis Trent said that taxing the money people make from selling things like property or stocks makes Missouri less competitive in the US and around the world.

Who will get something good from changing the tax?

People who don't like it say that rich people will get the most.

Sam Waxman said that stopping the tax on capital gains in Missouri would be a bad example for other states and would make problems with money and race worse.

A government study found that white families made more money from selling things like stocks than some minority families. For families with average incomes, about 8% of white families paid less tax on this money because of government rules. But only 3% of Black families and 1% of Hispanic families did this, according to a report from 2023.

In Missouri in 2022, about 542,000 people who pay income tax made money from selling things like stocks. This was only 20% of all people who paid taxes. A group called the Missouri Budget Project does not want to stop the tax on this money. They think that if the tax is stopped, most of the money saved (80%) will go to the richest 5% of people who pay taxes.

How much money would the government lose if they stopped the tax on profits from selling things?

Experts think if a tax is removed in Missouri, it could cost the state about $262 million each year. But people have different opinions about this.

The Missouri Budget Project thinks it could cost almost $600 million every year.

Trent thinks that if the tax is stopped, the economy will grow more, and this will bring in more tax money later.

Owen Zidar, a professor, studied how taxes on selling things changed in states for 40 years. He found that when taxes were lower, more people sold things to make money. But the states did not get enough money from these sales to make up for the lower tax.

Zidar said he doesn't think getting rid of the tax on profits in Missouri will bring a lot of new business and money.

He said he thinks they will earn much less money.