Missouri tax bill exempts crypto and stock gains from income tax

In a significant development, Missouri lawmakers have approved a comprehensive tax legislation that exempts capital gains from state income taxes, now awaiting the signature of Governor Mike Kehoe.

The bill, strongly backed by House Republicans, passed in the House on Wednesday with unanimous GOP support and ten Democrats opting to vote “present.”

Set to take effect retroactively from 2025, this measure is projected to impact state revenue significantly, with an estimated loss of $430 million in the current fiscal year and about $340 million each year thereafter, as reported by the Missouri Independent.

Concerns were raised by Democrats regarding the potential repercussions on the state budget, especially considering that current revenue trends are already running over 2% below expected figures.

While the legislation aims to provide targeted tax relief—such as enhancing the “circuit breaker” property tax credit for low-income seniors and individuals with disabilities, and removing state sales tax on essential items like diapers and feminine hygiene products—critics argue that the capital gains exemption disproportionately favors higher-income earners. Interestingly, in 2022, only 0.8% of Missouri taxpayers accounted for 65% of the reported capital gains in the state.

Additionally, this new law would exempt capital gains from cryptocurrency investments from taxation, potentially triggering an uptick in digital asset trading and long-term holding among Missourians. However, this could exacerbate the state’s revenue shortfall, particularly if cryptocurrency values continue to rise.

Exemption for Corporate Capital Gains

It’s important to note that corporate capital gains will remain taxable until at least 2030, aligning with a pre-existing trigger law that reduces Missouri’s top individual tax rate to 4.5%. This gradual approach has garnered support from five out of ten Senate Democrats.

Republican leaders, including the bill’s sponsor, House Speaker Pro Tem Chad Perkins, have defended the initiative as a catalyst for investment and a means to lessen the tax burden on residents.