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Missouri stands at the threshold of a tax policy revolution that could make it the first U.S. state to completely eliminate capital gains tax, a move that could significantly shift investment dynamics across the country; especially for cryptocurrency holders, stock market investors, and real estate stakeholders.
House Bill 594, which has passed both chambers of the Missouri legislature, now awaits the signature of Governor Mike Kehoe. If enacted, the bill would implement a 100% state income tax deduction on capital gains, including profits from digital assets such as Bitcoin and XRP. This would effectively nullify Missouri’s tax on capital appreciation from July 1, 2025, making it a potentially unmatched tax haven within the United States.
Shifting Missouri’s Fiscal Landscape
Previously, Missouri taxed capital gains as ordinary income, with tax rates ranging from 0% to 4.7% depending on income brackets. For example, an individual earning $350,000 in capital gains could face a state tax liability of approximately $16,273.55.
The new bill proposes a sweeping reversal. Investors who realize capital gains from sales of assets whether from the stock market, real estate, or cryptocurrencies would owe nothing in Missouri state taxes. The implications could be wide-ranging, from increased in-state investment to potential budgetary gaps.
Budgetary Implications and Equity Concerns
The Missouri Department of Revenue projects a potential annual loss of $262 million in tax revenue beginning in fiscal year 2026. Independent fiscal analysts, however, warn the actual shortfall could exceed $600 million annually, depending on capital market performance and investor migration.
Critics argue that the measure disproportionately benefits high-income earners, who account for the vast majority of capital gains. According to a 2023 IRS report, the top 1% of earners captured over 75% of all capital gains nationally.
“This is a textbook regressive policy,” said Dr. Liana McCree, tax policy director at the Urban-Brookings Tax Policy Center. “While middle-class families might see a marginal benefit, the bulk of the windfall will go to a very small number of wealthy households.”
Political Momentum and Broader Trends
Supporters, including business advocacy groups and Missouri Republican lawmakers, argue that the bill will enhance the state’s competitiveness, attract investment, and stimulate economic activity.
“This legislation puts Missouri on the map as the most investor-friendly state in the country,” said State Rep. Cody Smith, one of the bill’s co-sponsors.
The move mirrors broader national trends. Just weeks ago, former President Donald Trump proposed federal tax reforms centered on eliminating income tax in favor of import tariffs. In an April 27 post on Truth Social, Trump hinted that tariffs would lead to substantial reductions or even elimination of income tax burdens.
If enacted, Missouri’s policy could add momentum to such ideas and encourage similar initiatives in other Republican-led states.
Additional Measures and Provisions
House Bill 594 is part of a wider fiscal package that includes expanded sales tax exemptions on medical devices and agricultural equipment. It also introduces new childcare and senior care tax credits and adjusts the calculation formula for retirement income deductions.
These provisions are designed to offset concerns that the capital gains tax repeal favors only the wealthy. However, fiscal watchdogs remain skeptical. “The credits are welcome, but they don’t come close to balancing the windfall that high earners will receive,” noted McCree.
Market Impact and Industry Response
Investor reaction has been swift. At the time of writing, Bitcoin is trading above $104,000—an all-time high—while XRP is holding at $2.38, with both seeing double-digit gains in the 24 hours following the bill’s passage.
“This is the most bullish policy signal we’ve seen at the state level,” said James Adler, founder of crypto investment firm Atlas Node. “Missouri may very well become a crypto capital.”
Still, the legislation is not law yet. Governor Kehoe has not formally indicated whether he will sign the bill, and his decision will be closely watched across financial and political sectors. Should he sign it, Missouri could become a testing ground for the viability of zero-capital-gains taxation in a developed economy.
What’s Next
The Governor’s office is expected to make a formal statement by mid-May. If signed into law, the tax change will take effect July 1, 2025. As momentum builds around state-led tax innovation, Missouri may find itself at the center of a national conversation about the future of taxation in an increasingly digital, mobile economy.
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