Missouri lawmakers have recently made a significant move by passing a comprehensive tax bill that exempts capital gains from state income tax. The bill has now been sent to Governor Mike Kehoe for signature, marking it as a top priority for House Republicans.
The bill, which received support solely from GOP members in the House and with 10 Democrats voting “present,” includes a provision that applies retroactively to capital gains realized in 2025. This move is expected to result in an estimated $430 million hit to state revenue for the current fiscal year, with an annual impact of $340 million thereafter, as reported by the Missouri Independent.
Although the bill offers targeted relief measures, such as expanding the “circuit breaker” property tax credit for low-income seniors and individuals with disabilities, as well as exempting state sales tax on items like diapers and feminine hygiene products, concerns have been raised by Democrats regarding its impact on the state’s budget. They point to existing state revenue trends that are already more than 2% below projections.
One of the contentious points of the bill is the exemption of capital gains from cryptocurrency transactions. While this move may encourage more digital asset trading and long-term holding in Missouri, it could potentially deepen the revenue shortfall for the state, especially if the value of cryptocurrencies continues to rise.
Interestingly, corporate capital gains will not be exempt until at least 2030, coinciding with when Missouri’s top individual tax rate is set to fall to 4.5% under an existing trigger law. This delayed timeline played a role in garnering support from five out of ten Senate Democrats.
Supporters of the bill, including House Speaker Pro Tem Chad Perkins, have defended it as a means to stimulate investment and alleviate tax burdens. However, critics argue that the exemption of capital gains disproportionately benefits high-income earners, with data showing that in 2022, only 0.8% of Missouri taxpayers accounted for 65% of the state’s reported capital gains.
Overall, the passage of this tax bill in Missouri has sparked debate and raised questions about its potential implications on state revenue and the distribution of tax benefits. As Governor Kehoe considers signing the bill into law, its impact on various sectors of the economy, including the cryptocurrency market, will be closely monitored.