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 is the first state in the nation to tax income but not capital gains after the state legislature passed a law eliminating the state’s capital gains tax during the 2025 session.

Capital gains are profits made from selling assets like stocks and real estate. Eliminating the tax on those profits will overwhelmingly benefit the state’s millionaires , according to a new report from the Institute on Taxation and Economic Policy (ITEP), a left-leaning economic think tank.

According to ITEP’s analysis, more than 66% of the tax savings under the new law will go to the top 1%, or those with incomes averaging $

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