People who sell stocks or houses and make money might soon pay less tax in Missouri. Missouri could be the first state in the U.S. to do this.

A new law approved on Wednesday would stop the tax on profits from investments this year for people. It could also stop it for companies later if the state has enough money. The bill will now go to the Governor, who says he supports it.

Some people hope this tax change will help the economy. But others say it will mostly help rich people. They also say it will mean less tax money for schools and services. The government group (Republicans) was able to pass the law. They did this after adding more tax help for older people and people with disabilities. They also added no sales tax on diapers and products for women.

Missouri has a special rule for income tax. This is happening while other states are also lowering their income taxes. At the same time, Congress is thinking about keeping and making bigger some tax breaks that started when Donald Trump was president.

What is a tax on the money you make when you sell something for more than you bought it?

When you sell things like stocks or a house and make more money than you spent, that extra money is called a capital gain. If you own these things for more than a year before selling, the government takes less tax from this extra money than from the money you earn from your job.

Most states that tax your income also tax the extra money you make when you sell things like stocks or property. This extra money is called capital gains.

Some states with Democratic leaders are doing the opposite. For example, in Maryland, people who make more than $350,000 will pay a new 2% tax on some profits. In Washington, there is a new rule for an extra 2.9% tax on profits over $1 million. Minnesota already has an extra tax on profits and other money from investments over $1 million.

Why is it a good idea to stop taxing the money people make from selling things like shares or houses?

Some people think that if the tax on the money you make from selling things like shares or houses is removed, people will invest more. They also believe this tax makes people keep their things instead of selling them and spending the money on other things in the economy.

"When you tax something, people do less of it," said an expert. "The idea is, you want more companies to put money into your state."

Chad Perkins, a politician, said his friends from a building company told him this idea last year. They had to pay this tax, and it was difficult for them. He also said his law could help farmers who want to sell their land.

Republican Senator Curtis Trent said that taxing the money people make from selling things like stocks is bad for Missouri. He said it means fewer chances for businesses, money doesn't move as fast, and people earn less. He thinks this makes Missouri less able to compete with other places in the US and around the world.

Who would get money if the tax stops?

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

Sam Waxman, who works for a group that studies money, said that if Missouri stops taxing profits, it would be a bad example for the country. He also said it would make money problems and unfairness worse for people.

A government study found that white families often earn more money from selling things like stocks than some other groups. 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.

In Missouri, about 542,000 people who pay income tax had capital gains in 2022. This was only one-fifth of all taxpayers. A group called the Missouri Budget Project said this. This group does not want the capital gains tax to stop. They think 80% of the tax money saved would go to the richest 5% of taxpayers.

How much money will the government lose if they stop the tax on profits?

People who study laws in Missouri think that if the state stops taxing money made from selling things, it could lose about $262 million each year. But people who like the idea and people who don't like it disagree about this number.

The Missouri Budget Project thinks the cost could be almost 600 million dollars every year.

Trent thinks that if the tax is removed, the economy will get better, and this will mean more tax money later on.

Owen Zidar, a professor at Princeton University, studied how taxes on investments changed in states for 40 years. He found that when these taxes were lowered, more people sold their investments and made money. However, he said the states still lost money because they didn't collect enough tax.

Zidar said he is not sure if stopping a tax on money made from selling things will bring a lot of new business and help the economy in Missouri.

He said, "I think we will have much less money coming in."