JEFFERSON CITY, Mo. — Investors who profit from selling stocks, real estate and other assets soon could reap an even larger benefit in Missouri, which is poised to become the first U.S. state to exempt capital gains from its income tax.
Legislation that won final approval Wednesday would halt the capital gains tax this year for individuals and could eventually eliminate it for corporations, if state revenues keep growing. The tax repeal now heads to Republican Gov. Mike Kehoe, who has said he’s “very supportive” of it.
Though proponents hope it can spur the economy, detractors assert that the capital gains tax repeal will primarily benefit the rich and result in less tax revenue for public schools and services. The Republican-led Legislature overcame objections by Democrats only after expanding the bill with greater tax breaks for seniors and disabled residents and new sales tax exemptions for diapers and feminine hygiene products.
Missouri’s unique income tax carve-out comes as Republican-led legislatures in at least eight other states have passed more traditional income tax rate reductions this year. It also comes as Congress weighs whether to renew and expand income tax breaks enacted during President Donald Trump’s first term in office.
Capital gains are profits from the sale of assets such as stocks, cryptocurrency or property. The federal government taxes long-term capital gains, on assets held for more than a year, at a lower rate than ordinary income.
All states that tax income also tax capital gains. Missouri currently is among 32 states and the District of Columbia that tax capital gains at the same rate as wages and other income, according to the nonprofit Tax Foundation. Eight states tax capital gains at a lower rate than other income.
Some Democratic-led states have been moving in the opposite direction. Maryland lawmakers last month passed a bill that would impose a 2% capital gains tax on those with incomes over $350,000. And Washington lawmakers recently passed legislation to impose an extra 2.9% tax on capital gains over $1 mi