JEFFERSON CITY — The Missouri Senate on Wednesday gave initial approval to a large tax cut package.

Democrats and some skeptical Republicans allowed the legislation to advance after negotiating in some longstanding priorities, such as removing the 4.225% state sales tax on diapers and period products, and an increase to a tax credit benefiting seniors.

The legislation allows Missourians to deduct 100% of all capital gains income reported to the IRS from their state income tax liability.

That provision mostly benefits the rich. Just 8,230 Missourians who have an income over $1 million annually accounted for more than half of the state’s capital gains, according 2022 tax year data.

The bill sponsor, Sen. Curtis Trent, R-Springfield, argued it would spur business and, therefore, help all Missourians.

“In essence, every Missourian (will benefit), from workers whose labor is now more valuable because they’re able to work with more capital inputs, to small businesses and family farms, who can make decisions based on what’s good for business rather than what minimizes their tax liability,” Trent said.

Gov. Mike Kehoe also supports cutting the capital gains tax. “I think we will have success if we get rid of the capital gains tax,” he said at a Missouri Press Association event earlier this year.

Trent added that capital gains taxes hurt family farmers if inheritors have to pay high taxes when receiving property.

After getting a first run on the Senate floor the proposal faced bipartisan pushback.

Some Republicans argued income taxes wouldn’t be able to continue dropping if the state loses a revenue source like capital gains. Currently, the income tax rate falls when revenue rises.

Paying Missourians back for capital gains taxes would threaten revenue increases.

The provision is projected to cost the state about $110 million annually once implemented, according to a nonpartisan fiscal analysis. An updated fiscal analysis on the entire legislation has not been created at this time.

“(When) people sell a million dollars with a Microsoft stock, I’m not sure paying 4.7% of that in taxes is awful,” Sen. Mike Cierpiot, R-Lee’s Summit, said in a previous debate on the issue.

On Wednesday, Cierpiot said he was moved to support the measure after tax relief for poor seniors was added.

“So I guess we’re going to help the very rich and the very poor,” he said in an interview with the Post-Dispatch.

“This (capital gains tax credit) is simply irresponsible and a slap in the face to the bulk of Missouri taxpayers struggling to afford groceries and who already pay a higher portion of their income in state and local taxes than do the folks who will get a windfall from the capital gains exemption,” Missouri Budget Project CEO Amy Blouin, said in a statement.

The senior relief updates an existing tax credit so seniors living on low and fixed income can claim up to $1,550 in tax credits on rent or property taxes. That amount will raise with inflation. The credit has grown less effective as the income limitations haven't been adjusted since 2008. Currently the maximum amount of credits someone can receive is $1,100.

Democrats got a provision in to remove the 4.225% sales tax on diapers and period products. Under Missouri law, those necessities are considered “luxury” items.

Corporations wouldn’t be able to claim their capital gains under the proposal until certain revenue markers are met, a compromise negotiated by Democrats.

The legislation needs another procedural vote in the Senate before going to House.

The legislation is House Bill 594.

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