Senate takes up capital-gains repeal as senators warn of hundreds of millions in lost revenue

The Missouri Senate on March 31 moved House committee substitute for House Bills 594 and 508 to the floor for third reading, launching an extended debate over a proposal to eliminate the state's capital-gains tax.

The motion to take up the substitute was offered by the senator from the twentieth and approved by the Senate. The senator from the twentieth described the measure on the floor as "a clean substitute" intended to provide a working text for negotiation and final votes.

Why it matters: Senators on both sides said the change would reduce general-revenue receipts by hundreds of millions of dollars a year and that those cuts would compete directly with funding priorities such as the foundation formula for public schools, services for Missourians with developmental disabilities and other state obligations. Several senators urged further negotiation or additional offsets before final passage.

Sponsor and substitute: The senator from the twentieth told colleagues the substitute was "substantively the same as the underlying bill" and described the circulating text as technical adjustments to the original language. The sponsor moved for a waiver of reading and for adoption of the substitute; the Senate waived the reading. Debate then turned to pending amendments.

Delay amendment and debate: The senator from the first offered senate amendment 1, which the sponsor explained would delay implementation of the capital-gains repeal until the top individual income tax rate fell below 1 percent. The senator from the first described the amendment as "none of this would be implemented until the top tax rate is down lower than 1%," and said he could "take any questions."

Fiscal impact and beneficiaries: Multiple senators cited the bill's fiscal note and its distributional effects. The senator from the first said, "this would be a minimum of a $300,000,000 fiscal impact per year." The senator from the 20 fourth pointed to the broader revenue picture and asked how large tax cuts would fit into the budget over several years, noting that other major revenue risks exist, including potential federal Medicaid reimbursement changes.

Several senators emphasized who would benefit. The senator from the 20 fourth criticized the legislation as primarily advantaging the wealthiest taxpayers and corporations, saying the change would remove tax on "the sale of stocks, cryptocurrencies, real estate, other valuables" and that corporate capital-gains treatment was a significant portion of the fiscal note. The senator from the twentieth characterized the bill as consequential for Missouri's competitiveness and economic growth.

Budget context and carry-over risks: Senators repeatedly placed the bills against the state's broader budget process. Members on the appropriation side reminded colleagues that the legislature is drafting the FY26 budget now, and that the state faces potential liabilities (including shifts in Medicaid federal matching rates) that could require billions in additional state funds over coming years. The senator from the 20 fourth said state policy choices to cut revenue should be weighed against obligations such as the foundation formula and other constitutionally or judicially required funding.

Other policy trade-offs raised during floor discussion included: - Education: several senators warned that a $300 million annual reduction in general revenue would roughly equal proposed shortfalls in the governor's foundation-formula recommendation and could worsen underfunding for neighborhood schools. - Public services and human services: senators described direct effects on programs for individuals with developmental disabilities, community-based supports, and local infrastructure grants that depend in part on state matching funds. - Corporate versus individual gains: senators cited fiscal-note breakdowns showing a large share of the revenue loss would come from corporate capital-gains treatment rather than wage-earners.

Procedure and next steps: The sponsor placed the substitute and amendment before the Senate and the body debated the substitute and amendment on the floor. At the close of the transcript provided here there was no recorded final floor vote on the substitute or adoption of senate amendment 1; the motion to take up the substitute and the waivers of reading were approved earlier in the day.

Ending note: Sponsors said they wanted more floor-level negotiation and additional conversations with colleagues before a final vote. Several senators asked for follow-up briefings on the fiscal note's assumptions and on alternatives that would target relief more narrowly to lower- and middle-income taxpayers.