Missouri Senate committee moves quickly on capital gains tax cut

by Rudi Keller, Missouri Independent
February 25, 2025

The first bill passed by the Missouri House that is headed to the Senate floor for debate would exempt long-term capital gains from the state income tax.

On a 3-2 party-line vote, the Senate General Laws committee approved the bill to create the new tax deduction. The bill passed the House on Feb. 13, also on a party-line vote, with Republicans supporting the measure and Democrats opposed.

If passed into law, the proposal sponsored by House Speaker Pro Tem Chad Perkins, a Republican from Bowling Green, would reduce state revenue by about $335 million in the year starting July 1 and permanently reduce revenue by about $234 million per year.

The committee took quick action, Chairman Curtis Trent of Springfield said, because it had already voted to approve identical legislation filed in the Senate. That bill is on the Senate calendar awaiting debate.

“This has been a priority in both chambers, and there’s no reason to delay, you know, passage of it through the process,” Trent said after the vote.

The bill would allow Missourians to deduct any income reported on their federal returns as long-term capital gains from the income subject to the state income tax. 

Federal law taxes long-term capital gains, defined as assets held for more than one year, at lower rates than income from wages. Current Missouri law does not make a distinction between the two sources of income.

State Rep. George Hruza, a Republican from St. Louis County, said during Tuesday’s hearing that eliminating the state taxes on capital gains will boost the Missouri economy by encouraging investment, both from the sale of existing assets and from newcomers to the state.

“This frees up capital because right now, people don’t sell their property because of capital gains tax,” Hruza said.

While it may become the first tax-cut bill debated in both chambers, it is by no means the largest being considered. Last week, the Senate Economic and Workforce Development Committee approved a pair of bills that would, if approved by voters, eliminate the state income tax in 2027.

The debate on taxes comes as Missouri is in a period of sluggish revenue growth. Through Monday, general revenue receipts are down nearly 2% from the fiscal year that ended June 30.

Revenue increased 1.5% in the most recent fiscal year and it is projected to grow by 1.6% in the coming fiscal year.

The revenue reduction from a cut in the capital gains tax would be greater than the anticipated growth in the coming fiscal year.

Eliminating the tax on capital gains could cost more than the estimate and would mainly benefit wealthy taxpayers, Brian Colby, vice president of the Missouri Budget Project told the committee.

“We just want to go on the record with heartburn about the fiscal note,” Colby said, “and the concern about the distribution of the tax break that skews way up higher in the income scale.”

Missouri Independent is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Missouri Independent maintains editorial independence. Contact Editor Jason Hancock for questions: info@missouriindependent.com.

The post Missouri Senate committee moves quickly on capital gains tax cut appeared first on missouriindependent.com