May 9th, 2025
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In Missouri, people who make money from selling things like stocks or property might soon not have to pay tax on that money, as the state plans to stop taxing it.
A new law that was agreed on Wednesday would stop the tax on profits from selling property or shares this year for individuals. If the state makes more money, this tax might also end for companies in the future. This change will now be reviewed by the Republican Governor, Mike Kehoe, who has stated he is strongly in favour of it.
People who support the idea hope it will help the economy grow. However, those against it say that getting rid of the tax on profits will mostly help rich people and mean less tax money for schools and public services. The Republican politicians in charge managed to pass the law, even though the Democrats were against it. They only did this after adding more tax help for older people and those with disabilities, and stopping the sales tax on things like diapers and products for women.
Missouri has a special income tax rule. This is happening at the same time that Republican politicians in at least eight other states have agreed to more common income tax cuts this year. Also, Congress is thinking about whether to keep and make bigger the income tax benefits that started when President Donald Trump was first in office.
What does 'capital gains tax' mean?
Capital gains are the money you make when you sell things like stocks or property for more than you bought them for. If you keep these things for over a year before selling, the government taxes that money at a lower rate than your regular income.
In states that tax income, they also tax capital gains. Capital gains are the money you make when you sell something like property or stocks for more than you paid for it. According to the Tax Foundation, Missouri is one of 32 states and Washington D.C. that tax capital gains at the same rate as regular income. Eight states tax capital gains at a lower rate.
Some states controlled by Democrats have been doing the opposite.
Why should we remove the tax on money made from selling things like property or shares?
People who want to remove the capital gains tax say it discourages investment. They also think it makes people keep their assets instead of selling them and spending the money in other parts of the economy.
"Taxing something usually means you get less of it," said Jonathan Williams. "The goal is to have more investment in your state."
ALEC has supported getting rid of state taxes on profits for a long time. Chad Perkins, a politician in Missouri, said he got the idea from friends at a building company who had to pay the tax. He also said his plan could help farmers who want to sell their land.
Republican state Senator Curtis Trent, who was in charge of the bill in the Senate, said that the tax on capital gains causes problems like lost economic chances, a less flexible economy, and lower wages. He explained that these problems make it harder for Missouri to compete in the US and around the world.
Who would gain from ending the tax?
People who disagree say rich people will gain the most.
Sam Waxman, from the Center on Budget and Policy Priorities, said that getting rid of Missouri's tax on investment profits would be "a bad example" for the country and "make economic and racial differences worse."
A government study showed that white families are more likely to make money from selling things like stocks than some minority groups. The study found that about 8% of white families with middle incomes benefited from the government's tax rates on these earnings, but only 3% of Black families and 1% of Hispanic families did.
In Missouri, about 542,000 people who pay income tax reported making money from selling things like property or stocks in 2022. This was only about 20% of everyone who filed taxes, according to the Missouri Budget Project. This research group is against removing the tax on these profits. They believe that 80% of the tax help would go to the richest 5% of taxpayers.
How much money would the government lose if they stopped taxing the profit from selling things like stocks or houses?
Experts who study laws in Missouri believe that if the state stops taxing profits from selling assets, it could cost about $262 million each year once the change is fully in place. However, both those who support the idea and those who are against it disagree with this amount.
The Missouri Budget Project thinks it could cost almost $600 million each year.
Trent thinks that ending the tax will lead to "more economic growth, which will bring in more tax money" over time.
Owen Zidar, a professor at Princeton University, looked at how 584 changes to capital gains tax rates in different states affected things over 40 years. He found that when these taxes were cut, more people sold assets to make a profit, but not enough to replace the tax money the government lost.
Zidar said he doesn't believe claims that getting rid of Missouri's tax on profits from selling property will attract a lot of investment and business.
He predicted a significant decline in revenue.
May 9th, 2025
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