Missouri's Ambitious Plans to Eliminate Capital Gains Tax: A Breakdown
Political Developments Nationwide
In Missouri, the Republican-led legislature is primed to take their tax-cutting efforts to new heights, with plans to exclude profits from the sale of stocks, bonds, and real estate from state income taxes. Dubbed as an attempt to invigorate the local economy, this move could mark the first time a state with an income tax completely abolishes capital gains tax.
A Wealthy Benefactor
If approved, this measure would unquestionably benefit the wealthy, as most states have a tax system that already overburdens low-income households. Critics, including some Republican colleagues, argue that the proposal is decidedly favorable to the wealthy.
David Cooper, an analyst at the Economic Policy Institute, a left-leaning think tank, refers to the legislation as "egregious" given its concentration of benefits on the richest residents in the state. He advises against eliminating state income taxes altogether but considers the Missouri move more harmful due to the focus on wiping away capital gains income taxes.
Unequal Shares
While some Democratic-led states, such as Maryland and Washington, have pursued increases in taxes on the wealthy, others, like Kansas, Kentucky, and Mississippi, have approved more regressive tax changes. Jared Walczak, Vice President of state projects at the conservative-leaning Tax Foundation, explains that states continue to prioritize progressive spending through social service programs that aid the most vulnerable residents.
A Shift in Priorities
While various states have enacted high-profile tax cuts this year, the momentum appears to be slowing down. According to Walczak, states have accomplished much of their intended objectives after booming economies and an influx of federal cash in recent years. However, lawmakers in several states, including Oklahoma, South Carolina, and West Virginia, continue their efforts to eliminate state income taxes.
State-Level Disputes
Missouri's legislature has recently passed versions of the tax bill that, if reconciled, could potentially lead to a complete elimination of capital gains tax in the state. While the move would make Missouri's tax system less progressive, the exemption could cost $111 million per year, according to Missouri's Department of Revenue, with the top 5% of households benefiting disproportionately.
- The elimination of capital gains tax in Missouri, if approved, could disproportionately benefit the wealthiest residents, as most states' tax systems already burden low-income households, according to David Cooper, an analyst at the Economic Policy Institute.
- The Republican-led legislation in Missouri, aimed at invigorating the local economy, has been criticized for its perceived favoritism towards the wealthy, with some Republican colleagues expressing concerns.
- In contrast, Democratic-led states like Maryland and Washington have pursued increases in taxes on the wealthy, while others, such as Kansas, Kentucky, and Mississippi, have approved more regressive tax changes.
- Despite various states enacting high-profile tax cuts this year, the momentum is slowing down, according to Jared Walczak, Vice President of state projects at the Tax Foundation. However, lawmakers in states like Oklahoma, South Carolina, and West Virginia continue their efforts to eliminate state income taxes.
- The controversy surrounding Missouri's potential complete elimination of capital gains tax has sparked debate, with the move likely to make the state's tax system less progressive and cost $111 million per year, according to the Missouri Department of Revenue.
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