May 9th, 2025
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People in Missouri who make money by selling things like stocks or property might soon pay less tax.
A new law approved on Wednesday would stop the tax on profits from selling things like property or stocks this year for individuals. It could also get rid of it for companies if the state's income keeps going up. The plan to get rid of the tax will now go to the Republican Governor, Mike Kehoe, who has said he really supports it.
Supporters believe this change will help the economy, but critics argue that removing the tax on profits will mostly help wealthy people and lead to less money for public schools and services. The Republican-controlled government passed the bill despite opposition from Democrats. They managed this by adding more tax breaks for older people and people with disabilities, and by removing sales tax on items like diapers and women's hygiene products.
Missouri's special tax rule is different from other states. At least eight other states, led by Republicans, have recently reduced their income tax rates in a more common way. Also, Congress is thinking about continuing and making bigger the income tax reductions that started when Donald Trump was president.
What is a tax on the money you make from selling things like property or stocks?
When you sell things like stocks or property for more than you paid, you make a profit called a capital gain. The government taxes these profits at a lower rate if you owned the item for more than a year.
In most states, income and profits from selling assets are taxed.
Some states with Democratic leaders are doing the opposite. For instance, in Maryland, politicians recently passed a law to add a 2% tax on profits from selling investments like stocks, for people who make over $350,000. In Washington, politicians also recently approved a law to add an extra 2.9% tax on these profits when they are more than $1 million. Minnesota already adds an extra tax on these profits and other money made from investments over $1 million.
Why should we stop taxing profits from investments?
People who support getting rid of the capital gains tax say it discourages investment and encourages people to keep assets instead of selling them and spending the money in other parts of the economy.
Jonathan Williams, who is in charge of a group of conservative politicians and businesses, said, 'When you tax something, people do less of it.' He also said that the goal is to get more businesses to invest in the state.
ALEC has supported getting rid of state capital gains taxes for a long time. But Missouri House Speaker Pro Tem Chad Perkins said he thought of the idea last year. He got it from friends at a construction company owned by its employees. This company was having problems because of the tax. He also said his planned law could help family 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 investment gains leads to missed business chances, money problems, and lower pay. He thinks these things make Missouri less competitive in the US and around the world.
Who would gain from stopping the tax?
People against it claim rich people will benefit most.
Sam Waxman, from the Center on Budget and Policy Priorities, said that getting rid of Missouri's tax on capital gains would be a "bad example" for the country and would "make economic and racial differences bigger."
A government study found that white families are more likely to benefit from lower taxes on investments than some minority groups.
In Missouri in 2022, around 542,000 people who pay income tax said they made money from investments. This was only 20% of everyone who filed taxes. The Missouri Budget Project, a research group that is against getting rid of the tax on investment income, thinks that 80% of the tax cut would help the richest 5% of taxpayers.
How much money would the government lose if they stopped taxing the profit from selling things like stocks or property?
People who study laws think that if Missouri stops taxing profits from selling things like stocks, it might cost the state about $262 million every year when it is fully started. But people who support it and people who are against it don't agree on this number.
The Missouri Budget Project thinks the cost could be close to $600 million each year.
Trent believes removing the tax will cause the economy to grow more, which will result in more tax money later.
Owen Zidar, a professor at Princeton University, looked at how 584 changes to a tax on profits from selling things affected states over 40 years. He said that when this tax is lowered, more people sell things for a profit, but not enough to make up for the tax money the government doesn't collect.
Zidar said he is not sure if removing Missouri's capital gains tax will bring in a lot of investment and economic activity.
He said he thinks the money coming in will go down a lot.
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