Latest news with #ChadPerkins
Forbes
28-05-2025
- Business
- Forbes
Investment Income Tax Developments In Washington & The States
The move toward lower and flatter personal income tax rates is persisting as a dominant state policy trend in 2025. Mississippi Governor Tate Reeves (R-Miss.) and Oklahoma Governor Kevin Stitt (R-Okla.) enacted legislation this spring to phase out their income taxes in the coming years, while Governor Greg Gianforte (R-Mt.) signed into law the largest income tax cut in Montana's history. This year, however, state lawmakers have also made strides when it comes to reducing and repealing taxes on investment income. In Missouri, for example, Governor Mike Kehoe (R-Mo.) is preparing to sign a bill passed by legislators in April that will eliminate Missouri's capital gains tax. 'Once Gov. Mike Kehoe, who has reportedly expressed strong support for the idea, signs the bill, Missouri will become the first state in the nation to fully exempt profits from the sale of stocks, real estate, cryptocurrency, and other capital assets from state income tax,' Kiplinger reported in early May. 'Proponents argue the move will encourage investment in The Show-Me State and potentially spur job creation and economic growth.' 'This legislation is about creating a fairer tax system that supports growth and empowers individuals to keep more of their hard-earned money,' said Missouri Speaker Pro Tem Chad Perkins (R). 'I firmly believe this bill will have a great positive impact on our state's economy and the financial well-being of our citizens.' Representative George Hruza (R), who cosponsored the capital gains repeal bill with Representative Perkins, said the move will 'turbocharge Missouri's economy.' Days after Missouri lawmakers voted to repeal their capital gains tax, Governor Greg Abbott (R-Texas) approved a constitutional amendment that would prohibit the imposition of a capital gains tax in the Lone Star State. Texas, one of eight no-income-tax states, already has a constitutional prohibition on taxing wages. 'Voters will vote on this to ensure that we're not going to have a capital gains tax in Texas,' Governor Abbott said on May 14 immediately after signing the joint resolution to refer the capital gains tax prohibition to the ballot. 'The next tax law that I will sign will be a tax law to reduce your property taxes in Texas.' Recent developments in Texas and Missouri follow the completion in recent years of investment income tax phaseouts in Tennessee and New Hampshire. While state lawmakers have had success when it comes to improving the tax treatment of investment income, Republicans in Congress have faced pressure to raise federal tax rates on capital gains, namely in the form of a tax hike on what's referred to as 'carried interest.' Carried interest, a form of capital gain, refers to the share of a private equity fund's return on investment that is paid out to fund managers. The U.S. House passed a tax bill last week that will ensure the income tax rate cuts enacted as part of 2017's Tax Cuts and Jobs Act (TCJA), which provided a net tax cut to the vast majority of households, do not expire at the end of the year. As the debate moves over to the Senate, President Donald Trump (R), Speaker Mike Johnson (R-La.), and congressional Republicans are saying they would like to enact the tax bill before the Fourth of July. Despite pressure to 'pay for' maintenance of current federal income tax rates with offsetting tax hikes, the House-passed budget reconciliation package does not raise taxes on carried interest. House Republicans' rejection of calls for a carried interest tax hike is a relief to many of those who are concerned that such a tax hike, aside from direct adverse effects, would serve as the camel's nose under the tent in a longer term effort to raise rates on all capital gains. 'Democrats not only want to tax capital gains at ordinary income tax rates—over 40% all-in federally—they want this tax rate to apply to phantom gains derived merely from price inflation,' says Ryan Ellis, president of the Center for a Free Economy and an IRS-enrolled agent in charge of a tax preparation firm. 'It's gets worse, as some of them even want to tax gains before they are gains, before an investor sells.' Many progressives in Congress don't like that capital gains are taxed at a lower rate than wage income. Though passing a capital gains tax increase would be a heavy lift even in a Democrat-led federal government, politicians on both sides of the aisle have expressed interest in singling out carried interest as special form of capital gain that should be taxed at a higher rate. With the rising tide of populism, many Republicans across the country have increasingly taken to demonization of banks, hedge funds, private equity firms, and large companies in general. Yet, by targeting private equity with more punitive tax rates, Congress would end up harming the retirement plans for millions of public sector workers in nearly every state. In February, for example, the South Carolina Retirement System Investment Commission allocated $260 million to private equity funds. Public pension investment in private equity is not unique to South Carolina or to only red states. In fact, public pension funds in most states have made similar investments in private equity. Governor Tim Walz (D-Minn.), for example, has 17% of Minnesota's combined pension funds invested in private equity. The belief that raising taxes on carried interest would be economically harmful is not limited to columnists, policy analysts, and those who work in private equity. It's also shared by leaders on Capitol Hill and key members of the Trump administration. 'Private equity is growing our economy and boosting the retirement savings of working Americans,' said Senator Tommy Tuberville (R-Ala.). 'Jacking up taxes on carried interest will kill the goose that laid the golden egg.' Kevin Hassett, director of the White House National Economic Council, discussed the adverse effects that would come with a tax hike on carried interest in a 2010 policy brief for the American Enterprise Institute. In that brief, Hassett wrote that a tax hike on carried interest 'would be unwise to adopt' and that 'there is no compelling case that it will produce a more efficient allocation of capital.' Many believe the Tax Cuts and Jobs Act took the right approach to carried interest. The TCJA did not raise the tax rate on carried interest, but increased the timeline for investment after which the capital gains tax rate would apply. 'President Trump's tax law struck the right balance in 2017,' says Drew Maloney, president and CEO of the American Investment Council. 'A new 40.8% tax rate would be higher than China, Europe and Canada and would make the U.S. less competitive.' Critics of raising taxes on carried interest point out that higher tax rates on carried interest mean less capital to invest in the U.S., harming the overall economy. A 2022 Ernst & Young report estimated private equity's entire contribution to the domestic economy: 'In total, the US private equity sector, the sector's US suppliers, and the related US consumer spending supported an estimated 31.3 million workers earning $2.4 trillion in wages and benefits and generating $4.0 trillion in US GDP in 2022. PE-backed small businesses, their suppliers, and related consumer spending (i.e., a subset of this) together supported 4.4 million workers earning $360 billion in wages and benefits and generating $615 billion GDP. Additionally, the federal, state, and local taxes paid by, and related to, the US private equity sector totaled more than $700 billion in 2022.' Sen. Tim Scott (R-S.C.), a member of the Finance Committee, said he is 'excited about the future of private equity in South Carolina.' One thing that could curb that excitement is a tax hike on carried interest. Furthermore, for governors and legislators who have have been working hard to make their tax codes more conducive to investment, a federal tax hike on investment or wage income would counteract the benefits of pro-growth state reforms. Senator Scott and his colleagues, however, will soon have the opportunity to take federal tax threats off the table when they take up the House-passed tax bill.
Yahoo
07-05-2025
- Business
- Yahoo
Missouri bill exempting capital gains from income tax sent to governor
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways Missouri House Speaker Pro Tem Chad Perkins of Bowing Green speaks at a news conference Feb. 13 with state Rep. Melissa Schmidt, a Republican from Eldridge (Tim Bommel/Missouri House Communications). Missouri House Republicans muscled their biggest tax-cut priority of the year across the finish line on Wednesday, sending a bill exempting capital gains from income tax to Gov. Mike Kehoe. No Democrats supported the bill, although 10 did vote 'present' to show they supported provisions of the legislation other than the exemption on profits from the sale of property or investments held more than a year. The bill applies to income received this calendar year, so it has a bigger bite into state revenue for the current fiscal year than it does for future years. The fiscal note for the bill estimates the change could reduce state revenue in the first year just under $430 million. In future years, the bill is estimated to reduce revenues by approximately $340 million annually. House Speaker Pro Tem Chad Perkins, a Bowling Green Republican, sponsored the bill. In an interview after the vote, he said he was surprised that no Democrats joined Republicans on the 102-41 vote. 'There were a lot of Senate Democrats who voted for it,' Perkins said. The tax cut vote came as the Friday deadline for passing the state budget approaches. During debate, Democrats said they are concerned that state revenues are stagnant and federal funding for many programs is in jeopardy. 'There are good pieces in this bill, but I fear it might be a pig that we put some lipstick on,' said state Rep. Stephanie Hein, a Springfield Democrat. Citing estimates from a left-leaning think tank published in The Independent, Democrats also questioned whether the fiscal note truly reflects how much revenue would decline under the bill. Federal tax data from returns filed for 2022 shows individual income tax filers from Missouri reported $13.3 billion in capital gains income. Allowing a deduction of that amount would reduce state revenue by more than $600 million if it is all taxed at the top rate of 4.7% 'I'm not sure that our budget can afford that, especially at a time when we've chosen not to fully fund our schools,' said state Rep. Kemp Strickler, a Democrat from Lee's Summit. Perkins said he also thinks the fiscal note is inaccurate, but for a different reason. The estimate does not account for increased economic activity from new investments made by people who retain the money, he said. But he also acknowledged that the revenue reduction estimate could be inaccurate. 'The possibility exists that you are right as well,' Perkins said to Strickler. Under the bill, individuals would receive the capital gains exemption immediately. Corporations would be exempt in the year after the top individual income tax rate declines to 4.5% under a state law lowering the rate when revenue growth hits a trigger amount. Revenues are unlikely to trigger a one-tenth percentage point cut in the tax rate until 2028, the fiscal note states, making the corporate capital gains exemption unlikely until at least Jan. 1, 2030. The capital gains exemption for individuals is estimated to reduce revenue by about $110 million annually. Corporations are expected to see their taxes reduced by about $180 million annually when the exemption is triggered. The bill won votes from five of the 10 Democrats in the state Senate after the delay in the corporate exemption was added along with other tax cut provisions for lower-income Missourians. They are: Increased credit amounts and income limits for the refundable property tax credit known as the 'circuit breaker' available to people over 65 and people with disabilities. The changes included in the bill would reduce state revenue by about $84 million. A sales tax exemption for diapers and feminine hygiene products that would eliminate the 4.225% state portion of the tax. Local sales taxes would remain in place. The exemption would reduce state revenue by about $37 million annually. The circuit breaker tax credit was established in 1973. People over age 65 and those who have a qualifying disability and rent their homes can claim a tax credit to offset property taxes of up to $750 if their income is less than $27,500. The credit for homeowners is up to $1,100 if they own their home if their income is less than $30,000. The bill 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. For the first time, the credit amount and the income limits would be indexed for inflation. Most of the benefits from a cut in the capital gains rate for individuals would go to a small slice of taxpayers. The 23,800 federal returns filed for 2022 with incomes greater than $500,000 a year represent 0.8% of all returns but included 65% of the capital gains income. State revenues are already trending lower for the current fiscal year, down more than 2% through Tuesday. If continued to the end of the fiscal year, revenues would fall about $300 million below estimates made in January. Republicans who argued for the tax cut said they see no problem if revenues decline. The answer, they said, is to cut spending. 'I'm going to tell you,' said state Rep. Jim Murphy, a St. Louis Republican, 'if you keep spending, and you keep spending, and you keep spending, we're not going to be able to do the things we really need to do in this chamber, and that's to help the people who deserve it.' Democrats, however, said increases for the circuit breaker and the sales tax exemptions are attempts to mask a giveaway to the rich. 'No one's sitting at any marble tables around the 73rd talking about capital gains tax,' said state Rep. Raychel Proudie, a Democrat from Ferguson. 'They are talking about these eggs. They are talking about how they have to use the emergency room for their primary care physician. They do talk about that.' SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Gulf Today
05-05-2025
- Business
- Gulf Today
New tax cuts mostly favour the rich across states
Kevin Hardy, Tribune News Service Missouri Republicans may take their tax-cutting efforts to new heights this year as lawmakers consider exempting profits from the sale of stocks, bonds and real estate from state income taxes. Part of a broader push to eliminate the state income tax altogether, legislation making its way through the Capitol would provide an unprecedented benefit to the wealthy by excluding capital gains, the long-term earnings from the sale of assets. If approved, tax experts say, the legislation would mark the first time a state with an income tax has eliminated capital gains tax. The Republican sponsors say the move would make the state more attractive for businesses and families. 'This bill is intended to energise Missouri's economy,' Republican Speaker Pro Tem Chad Perkins said upon introducing the measure. But state Democrats — and even some of their GOP colleagues — have criticized the measure as being overly favorable to the wealthy. Most states' tax systems already put a higher tax burden on lower-income households. That trend only accelerated in this year's legislative sessions, worrying advocates who want to see the rich pay a larger share. 'It is so egregious in just how grossly concentrated the benefits of the (Missouri) proposal would go to the richest people in the state and shift the state's tax system to really privilege the owners of wealth over people who are earning a regular paycheck,' said David Cooper, an analyst at the left-leaning think tank Economic Policy Institute. The institute advocates for progressive state taxes — those that put the proportionately largest tax burdens on the highest earners. While Cooper advises against eliminating state income taxes, he said the Missouri move would be more harmful than eliminating the income tax outright. 'If you're wiping away the income tax altogether, there's at least some tax benefit going to lower-earning folks who are still paying income taxes,' he said. 'If you're just eliminating capital gains income taxes, you are just giving away money to the wealthiest people in the state, period.' Some Democratic-led states, including Maryland and Washington, have moved to increase taxes on the wealthy this year. But several states — including Kansas, Kentucky and Mississippi — have made more regressive tax changes. Jared Walczak, vice president of state projects at the conservative-leaning Tax Foundation, noted that states still prioritise progressive spending through social service programs aiding the most vulnerable residents. He said states compete against each other for business and residents in much more immediate ways than the federal government competes against other nations. 'So states are very focused on the competitive advantages associated with a pro-growth tax regime,' he said, 'and that has led to less of an emphasis in many states on achieving progressivity through the tax code.' 'Generational change' to taxes While several states have enacted high-profile tax cuts this year, the momentum is actually slowing, Walczak said. With booming economies and an influx of federal cash in recent years, conservative and liberal states alike passed significant tax cuts. Of the 43 states that have some sort of income tax, 28 have made rate reductions since 2021, Walczak said. 'In many states, lawmakers simply accomplished much of what they had set out to do,' he said. Economic uncertainty and the prospect of reduced federal aid also have made many lawmakers more cautious this legislative season, he said. But lawmakers in several states — including Oklahoma, South Carolina and West Virginia — have continued their march to eliminate state income taxes. 'Taxing people's wages is bad because it undermines liberty,' Oklahoma state Sen. Dusty Deevers, a Republican, said this month in support of a proposed income tax cut, the Oklahoma Voice reported. 'It undermines people's freedoms. If government controls income, then it controls your life.' This session, Kentucky Democratic Gov. Andy Beshear signed a bill cutting the state income tax rate from 4% to 3.5%. Republican lawmakers have been slashing rates for years with the ultimate aim of eliminating the income tax altogether, despite concerns that more reliance on sales tax would disproportionately burden the poor. To partially offset the income tax reduction, the legislature expanded sales taxes to more services in 2018. And Republican lawmakers in Kansas overrode a veto from Democratic Gov. Laura Kelly to move away from the state's graduated income tax toward a flat tax of 4% that will mostly benefit the highest earners. Last month, Mississippi Republican Gov. Tate Reeves signed legislation granting another cut in the state income tax. Officials there aim to phase out the income tax altogether over the coming years with gradual rate reductions, which Reeves characterized as'a generational change' for the state. The Mississippi law also reduces the sales tax on groceries and increases the gas tax. Though the governor is already celebrating the end of state income tax, the law provides for incremental reductions in the coming years only if the state hits certain revenue targets. Republican state Rep. Trey Lamar, a legislative sponsor, said income taxes disincentivize work — a particular problem for the state with the nation's lowest workforce participation rate. 'A tax on work is a tax on productivity,' he said. The left-leaning Institute on Taxation and Economic Policy says the law will make the state's tax system more inequitable. Its analysis found that when fully implemented, the top 1% of households, who have average annual incomes of $1.4 million, will receive an average cut of $41,420, or roughly 3% of their annual income. But the bottom 20% of earners, who have average annual incomes of $13,400, would realize a tax cut of just $42 per year. Lamar noted the legislation did not increase sales taxes across the board. With average sales tax burdens already lower than neighboring states like Alabama, he said the income tax elimination will only help Mississippi workers. 'We need more people working,' he said. 'So if helping the working man is somehow seen as regressive, then I'd have to say I don't fully understand that.' Walczak, of the Tax Foundation, said the state can afford the initial rate reduction. But it's unclear whether state revenues will hit the targets needed — and whether lawmakers will reassess the aim of eliminating income taxes. As one of the nation's poorest states, Mississippi is heavily reliant on federal funding and would be particularly vulnerable to an economic downturn. 'There's not a guarantee that the state could afford that in the future, and Mississippi does not have a large budget to begin with, so that would be harder than in most other states if the economy slid,' he said. 'It does require a willingness on lawmakers' parts to be honest with themselves if the economy changes and decide whether a pause might be necessary.' Economic uncertainty and slowing revenues have put many states into budget holes this year, forcing lawmakers to consider spending cuts or tax increases. To close budget gaps, some conservative and liberal states have considered new or higher taxes on marijuana, tobacco and soda. But some liberal-led states are looking to taxes more focused on the wealthy. In Rhode Island, Democratic Gov. Daniel McKee has proposed a 10% tax on digital advertising revenue. In Washington state, lawmakers approved raising capital gains taxes and business taxes to close a looming deficit, though it's unclear whether Democratic Gov. Bob Ferguson, who has voiced skepticism, will sign off on those measures. Maryland lawmakers, facing a $3 billion deficit, recently approved$1.6 billion in new taxes and fees. That includes two new high-income tax brackets and a new 3% sales tax on information technology and data services. Moves like those that ask more of the wealthy could make some state tax systems more progressive, said Aidan Davis, the state policy director at the Institute on Taxation and Economic Policy. But most state tax proposals approved this year have primarily benefited the highest earners. Missouri Republicans may take their tax-cutting efforts to new heights this year as lawmakers consider exempting profits from the sale of stocks, bonds and real estate from state income taxes. Part of a broader push to eliminate the state income tax altogether, legislation making its way through the Capitol would provide an unprecedented benefit to the wealthy by excluding capital gains, the long-term earnings from the sale of assets. If approved, tax experts say, the legislation would mark the first time a state with an income tax has eliminated capital gains tax. The Republican sponsors say the move would make the state more attractive for businesses and families. 'This bill is intended to energise Missouri's economy,' Republican Speaker Pro Tem Chad Perkins said upon introducing the measure. But state Democrats — and even some of their GOP colleagues — have criticized the measure as being overly favorable to the wealthy. Most states' tax systems already put a higher tax burden on lower-income households. That trend only accelerated in this year's legislative sessions, worrying advocates who want to see the rich pay a larger share. 'It is so egregious in just how grossly concentrated the benefits of the (Missouri) proposal would go to the richest people in the state and shift the state's tax system to really privilege the owners of wealth over people who are earning a regular paycheck,' said David Cooper, an analyst at the left-leaning think tank Economic Policy Institute. The institute advocates for progressive state taxes — those that put the proportionately largest tax burdens on the highest earners. While Cooper advises against eliminating state income taxes, he said the Missouri move would be more harmful than eliminating the income tax outright. 'If you're wiping away the income tax altogether, there's at least some tax benefit going to lower-earning folks who are still paying income taxes,' he said. 'If you're just eliminating capital gains income taxes, you are just giving away money to the wealthiest people in the state, period.' Some Democratic-led states, including Maryland and Washington, have moved to increase taxes on the wealthy this year. But several states — including Kansas, Kentucky and Mississippi — have made more regressive tax changes. Jared Walczak, vice president of state projects at the conservative-leaning Tax Foundation, noted that states still prioritise progressive spending through social service programs aiding the most vulnerable residents. He said states compete against each other for business and residents in much more immediate ways than the federal government competes against other nations. 'So states are very focused on the competitive advantages associated with a pro-growth tax regime,' he said, 'and that has led to less of an emphasis in many states on achieving progressivity through the tax code.' 'Generational change' to taxes While several states have enacted high-profile tax cuts this year, the momentum is actually slowing, Walczak said. With booming economies and an influx of federal cash in recent years, conservative and liberal states alike passed significant tax cuts. Of the 43 states that have some sort of income tax, 28 have made rate reductions since 2021, Walczak said. 'In many states, lawmakers simply accomplished much of what they had set out to do,' he said. Economic uncertainty and the prospect of reduced federal aid also have made many lawmakers more cautious this legislative season, he said. But lawmakers in several states — including Oklahoma, South Carolina and West Virginia — have continued their march to eliminate state income taxes. 'Taxing people's wages is bad because it undermines liberty,' Oklahoma state Sen. Dusty Deevers, a Republican, said this month in support of a proposed income tax cut, the Oklahoma Voice reported. 'It undermines people's freedoms. If government controls income, then it controls your life.' This session, Kentucky Democratic Gov. Andy Beshear signed a bill cutting the state income tax rate from 4% to 3.5%. Republican lawmakers have been slashing rates for years with the ultimate aim of eliminating the income tax altogether, despite concerns that more reliance on sales tax would disproportionately burden the poor. To partially offset the income tax reduction, the legislature expanded sales taxes to more services in 2018. And Republican lawmakers in Kansas overrode a veto from Democratic Gov. Laura Kelly to move away from the state's graduated income tax toward a flat tax of 4% that will mostly benefit the highest earners. Last month, Mississippi Republican Gov. Tate Reeves signed legislation granting another cut in the state income tax. Officials there aim to phase out the income tax altogether over the coming years with gradual rate reductions, which Reeves characterized as'a generational change' for the state. The Mississippi law also reduces the sales tax on groceries and increases the gas tax. Though the governor is already celebrating the end of state income tax, the law provides for incremental reductions in the coming years only if the state hits certain revenue targets. Republican state Rep. Trey Lamar, a legislative sponsor, said income taxes disincentivize work — a particular problem for the state with the nation's lowest workforce participation rate. 'A tax on work is a tax on productivity,' he said. The left-leaning Institute on Taxation and Economic Policy says the law will make the state's tax system more inequitable. Its analysis found that when fully implemented, the top 1% of households, who have average annual incomes of $1.4 million, will receive an average cut of $41,420, or roughly 3% of their annual income. But the bottom 20% of earners, who have average annual incomes of $13,400, would realize a tax cut of just $42 per year. Lamar noted the legislation did not increase sales taxes across the board. With average sales tax burdens already lower than neighboring states like Alabama, he said the income tax elimination will only help Mississippi workers. 'We need more people working,' he said. 'So if helping the working man is somehow seen as regressive, then I'd have to say I don't fully understand that.' Walczak, of the Tax Foundation, said the state can afford the initial rate reduction. But it's unclear whether state revenues will hit the targets needed — and whether lawmakers will reassess the aim of eliminating income taxes. As one of the nation's poorest states, Mississippi is heavily reliant on federal funding and would be particularly vulnerable to an economic downturn. 'There's not a guarantee that the state could afford that in the future, and Mississippi does not have a large budget to begin with, so that would be harder than in most other states if the economy slid,' he said. 'It does require a willingness on lawmakers' parts to be honest with themselves if the economy changes and decide whether a pause might be necessary.' Economic uncertainty and slowing revenues have put many states into budget holes this year, forcing lawmakers to consider spending cuts or tax increases. To close budget gaps, some conservative and liberal states have considered new or higher taxes on marijuana, tobacco and soda. But some liberal-led states are looking to taxes more focused on the wealthy. In Rhode Island, Democratic Gov. Daniel McKee has proposed a 10% tax on digital advertising revenue. In Washington state, lawmakers approved raising capital gains taxes and business taxes to close a looming deficit, though it's unclear whether Democratic Gov. Bob Ferguson, who has voiced skepticism, will sign off on those measures. Maryland lawmakers, facing a $3 billion deficit, recently approved$1.6 billion in new taxes and fees. That includes two new high-income tax brackets and a new 3% sales tax on information technology and data services. Moves like those that ask more of the wealthy could make some state tax systems more progressive, said Aidan Davis, the state policy director at the Institute on Taxation and Economic Policy. But most state tax proposals approved this year have primarily benefited the highest earners. x
Business Journals
29-04-2025
- Politics
- Business Journals
Missouri House again votes to eliminate income tax on capital gains
Missouri House Speaker Pro Tem Chad Perkins of Bowing Green speaks at a news conference Feb. 13 with state Rep. Melissa Schmidt, a Republican from Eldridge. (Tim Bommel/Missouri House Communications).
Yahoo
29-04-2025
- Business
- Yahoo
Missouri House again votes to eliminate income tax on capital gains
Missouri House Speaker Pro Tem Chad Perkins of Bowing Green speaks at a news conference Feb. 13 with state Rep. Melissa Schmidt, a Republican from Eldridge (Tim Bommel/Missouri House Communications). Missouri lawmakers are playing tax cut tennis, and on Monday the state House served its latest offering when it narrowed the differences with the state Senate in a bill that helps wealthy taxpayers and some who are at the bottom of the income scale. The proposal is the smallest, in terms of revenue reductions, of several bills intended to cut taxes this year. It exempts long-term capital gains — profits on investments or property held for more than a year — from state income tax. It also boosts the income limits and credit amounts for the refundable tax credit known as the circuit breaker, which helps defer the cost of property taxes for low-income seniors and people with disabilities. Those provisions mirror the language in a bill that has already passed the Senate but has not received a final House vote. One key difference is that the Senate-passed version would adjust the circuit breaker credit amounts for inflation starting in 2027, while the bill approved Monday does not. It also does not include the sales tax exemption for diapers and feminine hygiene products included in the Senate-passed bill. House Speaker Pro Tem Chad Perkins, a Republican from Bowling Green, said the latest plan was intended to send the Senate something it could accept. 'We feel like the Senate will be able to pass our language on this as is,' Perkins said. The bill began as a proposal to allow the Department of Revenue to forgive interest and penalties when it has to prorate tax credits because claims exceed the annual allowance. For the past three years, people claiming Missouri's food pantry tax credit found they didn't get the full value when the state Department of Revenue reviewed their returns. The bill passed by a 92-58 vote, with 11 Republicans voting against it along with all Democrats. The bill needs only a final Senate vote to send it to Gov. Mike Kehoe. During debate, Democrats warned that big tax cuts now are a mistake because of uncertainty, both in future support from federal funding and the possibility of an economic recession due to tariff and other policy shifts under President Donald Trump. 'Wait for another year. Let's see what happens with the U.S. economy before we cut another tax,' said state Rep. Steve Butz, a Democrat fromSt. Louis. 'We need to go slow, because you can't reverse this decision.' The tax limitations in the Missouri Constitution would require a statewide vote if, in a year or two, lawmakers decided they had cut taxes too much. The fiscal note for the bill, which gives the official estimate of whether it will increase or decrease state revenue, states that exempting capital gains would reduce revenue from the individual income tax by about $110 million annually, with another $180 million reduction with the corporate cut kicks in. Outside observers question that estimate, with the left-leaning Institute on Taxation and Economic Policy estimating that the revenue reduction could be $600 million or more. Since 2014, when lawmakers enacted a tax cut over the veto of then-Democratic Gov. Jay Nixon, Missouri's top income tax rate has fallen from 6% to 4.7%. Two future tax cuts, to a 4.5% rate, are already in state law and will take effect if general revenue growth hits targets. The changes in the circuit breaker credit would reduce state revenue by about $75 million annually. People 65 and older and those with a qualifying disability are eligible for a credit against property taxes on their residence. Since 2008 the maximum credit for homeowners has been $1,100, while for people who rent their home the maximum credit is $750. The legislation would increase the credit for homeowners to $1,550 and for renters to $1,055. The proposal would also increase the maximum income for claiming the credit from $27,500 for single taxpayers who rent to $38,200 and for single taxpayers who own their home from $30,000 to $42,200. For married couples, the limit would be $41,000 for renters and $48,000 for homeowners. Most of the debate Monday focused on whether the circuit breaker changes were enough to balance the benefits being provided to wealthy taxpayers. 'This is an amendment that our senior citizens need for us to do, as it truly helps those in the lowest income brackets,' said state Rep. Mark Matthiesen, a Republican from O'Fallon. 'Also those with disabilities need our help.' Democrats said the circuit breaker changes were designed to mask the problems that would be created by additional large income tax cuts. 'It's the arsonist,' said Rep. Mark Boyko, a Democrat from Kirkwood, 'telling us that they'll give us 10 seconds to go rescue the grandfather clock.' SUPPORT: YOU MAKE OUR WORK POSSIBLE
