Missouri Senate approves tax cuts for capital gains, diapers and low-income seniors

Yahoo

08-04-2025

The Missouri Capitol in Jefferson City (Tessa Weinberg/Missouri Independent).
The Missouri Senate approved a proposed tax cut Monday despite questions about whether official estimates truly reflect how much it would reduce state revenue.
By a 27-6 vote, with the 10 Democrats evenly split and all but one Republican in favor, the bill now heads back to the House, where its sponsor, Republican state Rep. Chad Perkins of Bowling Green, intends to bring it to a final vote.
Earlier in the afternoon, the cost estimate for the bill exempting long-term capital gains — profits from property held more than a year — was approved by a party-line vote in the Senate Fiscal Oversight Committee.
The bill would also increase income limits and credit amounts for the property tax relief program known as 'circuit breaker' as well as exempt diapers and feminine hygiene products from sales tax. Overall, the fiscal note for the bill states it is expected to reduce state revenue by almost $430 million in the fiscal year that starts July 1 and about $350 million annually thereafter.
Democrats who voted against the bill said they were concerned about estimates from a left-leaning Washington tax institute, reported by The Independent, that the capital gains cut could reduce state general revenue by $600 million or more compared to the official estimate of $111 million.
Missouri lawmakers set to pass capital gains tax cut with questions about its total cost
The committee vote came after Democrats peppered state Department of Revenue economist Jean Hancock with questions about the wide difference in the estimates.
'My question would be how can we be off by half a billion dollars?' Senate Democratic Leader Doug Beck of Affton asked.
The institute's estimate is based on IRS data from 2022 that showed $13.3 billion in long-term capital gains reported on returns from Missouri. Using the state's top tax rate of 4.7%, applied to taxable income more than $8,911, the institute estimated the revenue from that much income would be about $625 million.
That is simple math that does not account for the other elements of Missouri's tax code, Hancock told the committee.
'We actually pull every single person's return in our model, and we run them and we pull out exactly what was claimed,' Hancock said.'So that's where our numbers come from. Whoever has something else. I don't know where they get them.'
In an interview after the hearing, Hancock said there are a number of deductions allowed in Missouri law that reduce income below the amounts reported on federal returns. All income from Social Security payments and much of the income from pension benefits is not taxed, she noted, and many high-income earners purchase tax credits that eliminate part or all of their tax liability.
Another reason the institute's estimate is off, Hancock argued, is because not all capital gains reported on a return from Missouri are taxable in Missouri. A capital gain for property located in another state, for example, would not result in a Missouri tax payment.
'The capital gains numbers we're providing are the ones that we believe are accurate,' Hancock said to the committee.
Beck voted against the bill in committee and for it when it reached the floor.
Under the bill, which Gov. Mike Kehoe has said is a priority for his first year in office, the capital gains exemption would take effect immediately for individual income tax filers and after revenue triggers are met for corporate income taxes.
The circuit breaker is a refundable tax credit allowed for lower-income people over age 65 and those with disabilities to offset property taxes for their home. It is available to people who rent and people who own their own home.
Because it is refundable, people eligible for a credit that exceeds their tax liability receive a check for the difference.
The circuit breaker changes would increase the maximum credit for renters to $1,055. For homeowners, the maximum credit would be increased to $1,550. It would also increase the income limits for claiming the credit, to $38,200 for renters and $41,000 for homeowners, with slightly higher amounts allowed for married couples claiming the credit.
With revenues falling in the current year and a budget plan that uses about $1 billion of accumulated surpluses, some Democrats are opposing all tax cuts.
'I am just very, very concerned about how we continue to reduce state revenue,' said state Sen. Maggie Nurrenbern of Kansas City, who voted against the bill, 'and the impact that that's going to have moving forward.'
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