Missouri year in review: capital gains eliminated, Medicaid increased

By Andrew Rice
The Center Square

In 2025, Missouri lawmakers passed legislation to eliminate its capital gains tax, phase out the state income tax and expand Medicaid legislation.

The Club for Growth Foundation reviewed more than 550 floor votes in the Missouri legislature, scoring 15 in the House and 13 in the Senate. The foundation focused on policies that positively or negatively contributed to tax reform and deregulation throughout the state.

“The Club for Growth Foundation’s State Scorecard series aims to provide transparency for citizens, both in Missouri and across the country, into how elected officials approach the legislation that impacts their everyday lives,” said David McIntosh, president of the Club for Growth Foundation.

Missouri became the first state in the nation to pass legislation eliminating the capital gains tax for federal income tax purposes beginning Jan. 1, 2025. The Club for Growth estimated the capital gains exemption would reduce individuals’ tax burden by $485 million through fiscal year 2030.

However, not all lawmakers in Missouri approved the legislation. State Sens. Mike Moon, R-29, and Barbara Washington, D-09, voted against the bill alongside Rep. Kem Smith, D-068, among others.

While eliminating the capital gains tax, the bill also carved out small provisions for local tourism taxes and broadband infrastructure. The Missouri Senate, in a 27-6 vote, sent the bill to the Missouri House, where it passed 102-41.

Substantially, the Missouri legislature took significant steps to reduce state income tax rates in 2025. The legislation lowers the income tax to 4.7% beginning Jan. 1, 2026, and lowers the corporate income tax from 4% to 3.75%.

Rep. Kem Smith voted against the legislation alongside Rep. Bridget Walsh Moore, D-093. The Club for Growth Foundation gave Walsh Moore a 0% rating for her adherence to pro-growth policies in 2025.

The Club for Growth estimated the legislation reducing state income taxes would provide $6.54 billion in saved revenue over the next 10 years. The Missouri House passed the legislation 100-53 while the Senate passed it unanimously.

While Missouri saw some growth in its taxpayer-friendly policies, the state pursued an expansion of Medicaid programs. Missouri passed a bill appropriating $17 billion to the Department of Social Services and expanded its Medicaid program by 11.9%.

Moon voted against the bill but Washington voted yes, leading to its 25-8 passage in the Missouri Senate before it was approved 133-14 in the House.

“This bill perpetuates the state’s costly and harmful Medicaid expansion with no efforts to rein in a program that has devoured state budgets and resulted in poorer health outcomes for its recipients,” the Club for Growth wrote.

Across the country, McIntosh said he has seen states expanding Medicaid programs and causing a detrimental effect on taxpayers. He called on lawmakers to prioritize alternative paths to healthcare, instead of Medicaid.

“States should lead the way on healthcare freedom by expanding direct primary care, drastically increasing health sharing associations, expanding HSAs, and aggressively constraining Medicaid,” McIntosh said. “Lawmakers must begin to draw a line in the sand on Medicaid.”