Senate approves capital gains tax credit / Prop A rollbacks

By Sterling Sewell, Missouri News Network 

JEFFERSON CITY — The Missouri Senate passed a major tax cut Monday primarily benefiting Missouri’s top earners.
House Bill 594, proposed by Rep. Chad Perkins, R-Bowling Green, would allow Missourians to deduct 100% of all capital gains income reported on federal taxes from their state income taxes.
The bill passed in the Senate Monday on a 27-6 vote, after moving through the Senate Committee on Fiscal Oversight earlier in the day. There was no discussion on the Senate floor before the bill’s passage.
Capital gains are the profits made on the sale of assets — land, stocks, cryptocurrencies or tangible property — which have increased in value over the holding period.
This policy would primarily benefit Missourians making more than $1 million a year. The 8,230 Missourians who reported income over $1 million to the IRS in 2022 made 54% of the $13.3 billion total in capital gains income reported. When earners making $500,000 or more are counted, this percentage jumps to 65%.
Sen. Mike Bernskoetter, R-Jefferson City, chair of the Committee on Fiscal Oversight, said that there will likely be some benefit to Missouri’s top earners, but noted that this will likely benefit Missouri farmers as well.
Farmers seeking to sell their land to new owners could subtract 100% of the capital gain income made in the sale from their state income taxes, previously only a percentage of the capital gains on farm sales could be subtracted.
The bill is not only set to help Missouri’s top earners, but could also see the state lose roughly $111 million in individual income tax revenue annually, according to the bill’s fiscal note.
The Missouri Committee on Fiscal Oversight voted to move the bill to a final vote in the Senate earlier in the day, and the bill was passed in the Senate with no discussion. One more vote in the House is required before the bill can reach the governor’s desk for final approval.
The bill previously passed the House in February. It was initially approved by the Senate last Wednesday following negotiations with Democrats. The Democrats were able to include the elimination of state sales tax on diapers and period products and increases to a property tax credit benefiting seniors in the revised bill.
“Those are things that we have actually been trying to work with the Democrats for a long time,” Bernskoetter said. “I’m happy that we got those provisions put in.”
Including these negotiated provisions, general revenue is estimated to lose a minimum of $14.5 million from the elimination of the luxury tax on diapers and period products in the next year. The provision increasing the income limits for “circuit breaker” property tax credits would short general revenue another $72 million in the next year.
Another provision negotiated by Democrats would stop corporations from claiming their capital gains revenue until statewide revenue markers are met. The earliest a corporate cut could be expected would be in 2030.

Prop A rollbacks
Another bill passed by the Senate Committee on Fiscal Oversight on Monday would repeal provisions of Proposition A, a ballot initiative passed by 57% of the vote in the November election.
The proposition is set to raise the minimum wage to $15 by Jan. 1, 2026, and requires that wages continue to increase annually based on inflation.
The proposition also put in place requirements for businesses with 15 or more employees to provide one hour of paid sick leave for every 30 hours worked. This provision would go into place May 1.
Within the paid sick leave provision, there are exemptions for government employees, some employees working at businesses making $500,000 or less a year, babysitters and others.
House Bill 567, proposed by Rep. Sherri Gallick, R-Belton, would repeal the paid sick leave mandated in the proposition before it could go into effect.
The bill would also remove any additional increases to the minimum wage based on inflation but would not stop the increase to $15 in 2026.
Missouri lags behind the national average for median annual household income, at $68,920, according to a 2023 report from the U.S. Census Bureau, while the national median was $78,538. The report also finds that approximately 12% of Missourians live below the national poverty line.
However, some businesses associations take issue with the sick leave provision in the proposition.
“So, our concern with Proposition A is that there were many details buried in the body of the amendment that were not present that voters could see when choosing to vote for or against the measure,” said Ray McCarty, president and CEO of Associated Industries of Missouri, a business association.
The Missouri Chamber of Commerce, which represents Missouri businesses, has launched a lawsuit to take down Prop A. The Missouri Supreme Court recently heard arguments on the lawsuit in March.