Rewritten Article
Politics of the Nation |
In Missouri, a new tax-cutting proposal could reshape the state's economy - and its income distribution. Republicans are considering a move to exempt profits from stock, bond, and real estate sales from state income taxes, a move that could make the state more appealing to businesses and families but could also widen the wealth gap.
The legislation in question - one that excludes capital gains, the long-term earnings from asset sales - would mark the first time a state with an income tax has eliminated capital gains tax. Critics say it's too generous to the wealthy - and may make the tax system unfairly favor the wealthy.
"It's so egregious in just how grossly concentrated the benefits of this proposal would go to the richest people in the state," said David Cooper, an analyst at the Economic Policy Institute. The think tank advocates for progressive state taxes, those that put the largest tax burden on high earners.
With the proposal in question, high earners would receive a significant tax cut, while those earning regular paychecks could be left behind. Some Democratic states, such as Maryland and Washington, have instead opted to increase taxes on the wealthy this year. However, several states - including Kansas, Kentucky, and Mississippi - have implemented regressive tax changes.
If the capital gains exemption passes, Missouri would join states like Oklahoma, South Carolina, and West Virginia, which are working to eliminate state income taxes altogether.
Republican state Rep. Trey Lamar argues that the tax reduction would help workers and stimulate economic growth. "A tax on work is a tax on productivity," he said.
But Aidan Davis, the state policy director at the Institute on Taxation and Economic Policy, warns that the proposal could make the state's tax system more inequitable. The top 1% of households, who have average annual incomes of $1.4 million, would receive an average cut of $41,420, while the bottom 20% of earners, who have average annual incomes of $13,400, would receive only $42 per year.
Lamar counters that the legislation doesn't increase sales taxes across the board, and that the income tax elimination will help Mississippi workers. "We need more people working," he said.
However, economic uncertainty and slowing revenues have put many states in budget crunches, forcing lawmakers to consider spending cuts or tax increases.
Conservative and liberal states alike have enacted high-profile tax cuts this year, but the momentum is slowing. In many states, lawmakers have accomplished what they set out to do. And while some states are looking to taxes more focused on the wealthy, most state tax proposals have primarily benefited the highest earners. This is concerning because most state tax systems already favor the wealthy, as the top 1% of earners pay a lower effective tax rate than any other group in 41 states.
Overall, eliminating capital gains taxes can have a significant impact on state income taxes and income inequality. Proponents argue that it will foster economic growth by encouraging investments and attracting businesses to the state. However, critics argue that the largest benefits will accrue to wealthier individuals, exacerbating income inequality. The potential economic growth benefits are debated, and the overall impact will depend on how the revenue gap is filled and how other economic policies are managed in Missouri and similar states.
- The tax-cutting proposal in Missouri could redefine the state's economy and income distribution, as it exempts profits from stock, bond, and real estate sales from state income taxes.
- This proposed legislation, which excludes capital gains, would mark the first instance of a state with an income tax eliminating capital gains tax, leading critics to label it as too generous towards the wealthy.
- If passed, Missouri could join states like Oklahoma, South Carolina, and West Virginia, which are aiming to eradicate state income taxes entirely.
- Republican state Rep. Trey Lamar argues that the tax reduction would stimulate economic growth and help workers.
- However, Aidan Davis, the state policy director at the Institute on Taxation and Economic Policy, advises that the proposal could make the state's tax system more inequitable.
- The top 1% of households in Missouri would receive an average cut of $41,420, while the bottom 20% would only receive $42 per year.
- Economic uncertainty and slowing revenues have placed many states in budget crunches, forcing lawmakers to reconsider spending cuts or tax increases.
- Critics argue that eliminating capital gains taxes could exacerbate income inequality, as the largest benefits will accrue to wealthier individuals, and the overall impact will depend on how the revenue gap is filled and other economic policies are managed.
