All state laws passed in a regular session take effect Aug. 28 unless another date is specified. The capital gains tax cut will apply to all gains since Jan. 1 and will be reflected in the income tax returns due in April.
With the bill, Missouri became the first state to exempt profits from the sale of assets such as stocks, real estate, and cryptocurrency from income tax.
“The (Department of Revenue) is already preparing for next year’s tax season and we are making the adjustments required to accommodate this and other new laws that affect taxpayers,” Trish Vincent, the state revenue agency’s director, said in a news release.
The exemption is officially estimated to reduce revenue by approximately $157 million in the current fiscal year and about $111 million annually on an ongoing basis. But the fiscal note, updated June 23 after the bill was passed but before Gov. Mike Kehoe signed it, included a warning that the impact could be much larger.
Missouri taxpayers claimed $13.3 billion in capital gains income for 2022 on their federal income tax forms.
“Therefore, taking the 4.7 percent top rate would yield ($625.6 million) for FY 2026,” the new fiscal note states.
That is the same estimate The Independent reported in April based on estimates from the Institute for Tax and Economic Policy. The oversight division stated it “does not currently have the resources and/or access to state tax data to produce a thorough independent revenue estimate and is unable to verify the revenue estimates provided by (the Department of Revenue).”
Federal tax changes will further reduce state revenue, and the state is anticipating new costs for programs such as Medicaid funded jointly with the federal government.
Through Monday, general revenue has grown faster than expectations but the trend for the year is not clear. When he signed the budget in June, Kehoe vetoed about $300 million in earmarked items and warned of a looming shortfall.
“The Office of Administration’s Division of Budget and Planning estimates a nearly $1 billion shortfall in general revenue starting in (fiscal year 2027),” the release stated. “Contributing to this shortfall, ongoing general revenue spending authorized in the (fiscal year 2026) budget is projected to outpace ongoing revenues by nearly over $1 billion and grow larger in future years.”
This story first appeared in Missouri Independent. Read the original here.
