JEFFERSON CITY — Missouri will be the first state to grant a 100% capitol gains deduction if a bill passed by the Missouri House on Wednesday is signed by Gov. Mike Kehoe.

Sponsored by Reps. Chad Perkins, R-Bowling Green, and George Hruza, R-St. Louis, House Bill 594 and House Bill 508 would allow Missourians to deduct 100% of all capital gains income reported on federal taxes from their state income taxes. It would also exempt diapers and feminine hygiene products from sales tax, and increase a "circuit breaker" property tax credit amount for senior citizens and disabled individuals.

The bill passed by a 102-41 vote in the House after passing in the Senate last month.

Capital gains are profits earned from the sale of assets held for over a year. They can include things like stocks, bonds and cryptocurrencies, as well as valuable personal property.

Opponents of the bill have said the tax cuts would mostly affect wealthy Missourians. According to the IRS, Missouri reported $13.3 million in capital gains in 2022. Missourians who made $1 million or more a year made up 54% of that income.

The phrase "we don't have a revenue problem, we have a spending problem," was echoed by proponents of both bills pushing for capital gains deductions, who argued that the tax relief would be sustainable if Missouri spent less money each year.

The fiscal note for this bill estimates it would reduce state revenue by $430 million in the first year and around $350 million annually after.

However Rep. Darin Chappell, R-Rogersville, said he believes that Missouri has a duty to return people's money back to their pockets.

"Capital gains promotes economic development which promotes further business creation which promotes job creation which promotes stability," Chappell said. "We simply cut the weights, which accounts for 1.72% of the overall budget itself."

Rep. John Simmons, R-Washington, also said he believes that eliminating state income tax will attract economic growth in Missouri.

"We want the trust of the individual to keep more of their own money. To lift themselves up by doing things more efficiently as a government," Simmons said. "By lowering (capital gains), you're attracting investment in the state."

The bill's other tax cuts would short general revenue another roughly $72 million in the next year.

Rep. Emily Weber, D-Kansas City, supports the circuit breaker, but said she feels it was an afterthought.

"No one is asking me for this tax cut," Weber said. "To inextricably link this to an enormous tax cut that would have huge implications for health care, hospital operations, medicaid, schools; that is not the right path."

Rep. Kemp Strickler, D-St. Louis, questioned the bills' effect on the state budget amid federal funding cuts.

"I am concerned that this tax bill is filed at the same time as when our federal Medicaid and federal education funds are very much at risk," Strickler said. "We know that there's a good chance that tariffs are going to be increasing the price of our goods."

Rep. Raychel Proudie, D-Ferguson, believes the bill doesn't address bigger issues she sees in her district.

"I've heard a lot about people who are buying two or three houses," Proudie said. "I'm not hearing enough about the women who have to wrap a towel around their baby's backside to keep them clean and dry."

In addition to the tax cuts, the bills also bring investment to law enforcement and first responder groups, advance broadband internet expansion efforts and remove sales tax on broadband equipment.