Missouri state budget

If Missouri lawmakers agree to all of Kehoe’s proposed supplemental spending, that would represent a year-to-year cut of about $600 million. The future revenue picture is also clouded by the governor's efforts to eliminate the state income tax.

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 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.

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.

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 budget vetoes included money for tutoring programs, road infrastructure improvements, workforce development, food assistance and arts organizations. "These losses are huge," says Arts Asylum director Evie Craig.

Missouri Gov. Mike Kehoe signed the state budget into law last week, approving more than $50 billion in spending. But he also stripped more than half a billion dollars out that had been approved by lawmakers, including for dozens of programs and projects in Kansas City.

Months after area arts and culture nonprofits saw a loss of funds from the National Endowment for the Arts, Gov. Mike Kehoe has vetoed millions more in state support.

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.

In addition to legislation addressing the Kansas City Royals and Chiefs' stadiums, the special session will also focus on tornado relief for St. Louis and several projects that failed to get funded at the last minute.

The Missouri House declined to pass one budget bill that contained hundreds of millions of dollars for capital improvement projects across the state. Now that proposed funding is effectively dead for the session.

The House's budget bill is $3 billion less than last year's budget, and includes raises for state employees and $375 million for school transportation. It now goes to the Senate, where changes are likely.