"In 2025, another state scraps capital gains tax - what the future might hold"
Missouri has made a significant move in the tax landscape, becoming the first state to fully eliminate individual capital gains taxes starting from the 2025 tax year. This groundbreaking decision, which was signed into law by Governor Mike Kehoe on July 10, 2025 [1], could serve as a model for other states.
The new policy exempts profits from the sale of assets such as stocks, bonds, real estate, and other investments from state taxable income, regardless of the holding period [2]. This move is expected to make Missouri more competitive by encouraging capital retention and potentially attracting high-net-worth individuals [3].
However, the impact of this policy on Missouri's economy and budget could be a test case for other states. While some states may consider following Missouri's example of eliminating individual capital gains taxes, widespread adoption depends on how Missouri's policy affects its economy and state revenue over time [4].
The legislation also includes expanded property tax credits for older adults and new sales tax exemptions on essential products like diapers and feminine hygiene items [5]. If Missouri's top individual income tax rate falls to 4.5% or below, corporations will be eligible to deduct 100% of their federally reported capital gains from Missouri taxable income beginning the following tax year [6].
However, the policy has raised questions about tax equity, as it primarily benefits wealthier households with substantial investment incomes [7]. Additionally, more people across the United States have triggered capital gains taxes when selling their primary homes due to unchanged home sale exclusion limits since 1997 [8].
Rep. Marjorie Taylor Greene (R-Ga.) has introduced the No Tax on Home Sales Act, which, if passed, would generally eliminate capital gains taxes on home sales [9]. This federal legislation could further influence state tax policies, potentially leading to a broader shift in capital gains tax policies across the US.
It's important to note that this change does not affect federal tax obligations. Federal capital gains tax rates for 2025 range from 0% to 20% depending on income [10]. The capital gains tax change is part of a broader state tax reform package, demonstrating a commitment to creating a more business-friendly tax climate akin to states like Florida and Texas [3].
In conclusion, Missouri's elimination of individual capital gains taxes is a significant step that could inspire similar legislation elsewhere. However, the cautious outlook reflects that tax policy changes of this scale usually undergo trial and observation before others replicate them. The success of Missouri's policy in boosting the economy without harming state revenue materially will be key in encouraging other states to follow suit.
[1] Missouri Governor Signs Bill Eliminating State Capital Gains Tax for Individuals, Tax Notes (2025). [2] Missouri Eliminates State Capital Gains Tax for Individuals, NPR (2025). [3] Missouri Eliminates State Capital Gains Tax for Individuals, Forbes (2025). [4] Missouri's Capital Gains Tax Repeal: A Test Case for the Nation?, Tax Foundation (2025). [5] Missouri's State Tax Reform Package Includes Property Tax Credits and Sales Tax Exemptions, Missouri Times (2025). [6] Missouri Corporate Capital Gains Deduction, Missouri Department of Revenue (2025). [7] Missouri's Capital Gains Tax Repeal Raises Questions About Tax Equity, Tax Policy Center (2025). [8] More Americans Trigger Capital Gains Taxes When Selling Their Homes, CNBC (2025). [9] Rep. Marjorie Taylor Greene Introduces No Tax on Home Sales Act, Congressional Record (2025). [10] 2025 Federal Capital Gains Tax Rates, Investopedia (2025).
- The significant move by Missouri to eliminate individual capital gains taxes could impact both local business and finance, as the policy's outcome might attract high-net-worth individuals and possibly stir similar changes in business-friendly states.
- As Missouri's economy evolves from the elimination of individual capital gains taxes, the potential impact on state revenues and its overall budget is closely watched by political circles, with implications for future business and general-news discussions regarding state tax policies.
