Income Taxes

In his 2026 State of the State address, Gov. Mike Kehoe said he wants a statewide vote in November on his plan to phase out the state income tax and allow for taxes on things like monthly subscriptions and digital services. Democrats have questioned whether that's possible without wrecking future budgets.

Missouri Senate Democrats say they're still irate over how the GOP cut off debate last year — pushing through legislation to redraw congressional maps, ban abortion and repeal paid sick leave.

Missouri lawmakers arrive in Jefferson City on Wednesday for the start of the 2026 legislative session, which runs until mid-May. Gov. Mike Kehoe is pushing to eliminate the state income tax, but a smaller budget will likely force spending cuts.

Missouri Republicans made big moves last legislative session to force through their agenda on abortion, redistricting and more — and now the consequences will be felt this year. Democrats are determined to stall action in the state Senate as retribution.

The fund held $5.8 billion, a record, at the end of June 2023. Without changes to the budget, State Auditor Scott Fitzpatrick warns, the money will all be gone by June 2028.

When Missouri lawmakers voted on the bill, the tax cut was estimated to reduce revenue by about $111 million annually. Now the state budget director says the loss could be as much as $500 million the first year and $360 million annual annually.

This year, Missouri became the first state in the country to tax income, but not capital gains. That could present a challenge as the state prepares to face a budget shortfall.

Missouri's capital gains tax cut will apply to all gains since Jan. 1, and will be reflected in the income tax returns due in April. It's the first state to exempt profits from the sale of assets such as stocks, real estate, and cryptocurrency from income taxes.

The governor's office cited some unexpected budget items, and a recently passed bill eliminating Missouri's capital gains tax, as reasons for reducing spending. His largest veto was over $1 billion for a road construction program.

The Republican-led legislature is considering changing or repealing some voter-approved measures, including abortion legalization and the minimum wage hike. Lawmakers also need to pass a budget, which may look much smaller than previous years.

Missouri Republicans are enthusiastic about President Donald Trump’s second term. But they acknowledge that his first months in office haven’t been without hiccups. Plus: A Kansas bill would eliminate state income taxes on tips for workers like food servers.

One bill would set the state income tax to a flat rate of 4.7%, with the ability to reduce it to 3.7% over the next decade, and would also reduce the corporate income tax rate.