Governors and lawmakers across the country continued phasing down state income taxes in 2025. While 12 states cut personal income tax rates this year, Missouri stands out for becoming the first state to phase out taxation of capital gains when Governor Mike Kehoe (R-Mo.) signed HB 594 into law on July 11, four days after President Donald Trump signed the One Big Beautiful Bill Act into law.
“Conservative leadership is about keeping more money in the hands of Missouri families, and less in government coffers,” Gov. Kehoe said when signing HB 594, which permits 100% deduction of capital gains when calculating state income tax liability. “Today, we are protecting the people who make Missouri work—families, job creators, and small business owners—by cutting taxes, rolling back overreach, and eliminating costly mandates.”
The Governor and his team are now looking to strengthen a competitive economic environment crafted over the last decade by taxpayer champions in the legislature, including Speaker Chad Perkins, Senate President Pro Tem Cindy O’Laughlin, House Leader Alex Riley and Senator Ben Brown, who have been instrumental in enacting multiple personal income tax cuts over the last several years that ultimately took the top marginal rate from 6% to 4.7% today. Their efforts laid the groundwork for the first-in-the-nation capital gains tax elimination that now puts Missouri at the forefront of innovative, pro-worker tax policy, while providing immediate relief to every retiree, investor, and every worker with a 401(k).
“This legislation is about creating a fairer tax system that supports growth and empowers individuals to keep more of their hard-earned money,” Missouri Speaker Pro Tem Chad Perkins (R) said about HB 594. “I firmly believe this bill will have a great, positive impact on our state’s economy and the financial well-being of our citizens.” Representative George Hruza (R), a HB 594 cosponsor who championed the bill in the House, added that repealing the state capital gains tax will “turbocharge Missouri’s economy.”
After Leading on Cap Gains Repeal, Missouri Poised to Do the Same with Personal Income Tax Phase Out
While Missouri led the nation in eliminating state taxation of capital gains, the Show Me State is also poised in 2026 to leap ahead in a growing nationwide movement to phase out state taxation of all income. Gov. Kehoe has already made clear that personal income tax elimination will be his top tax priority in 2026. Expect Gov. Kehoe to focus on the matter during his State of the State address scheduled for January 15, fulfilling a key campaign promise and cementing his legacy early as a governor committed to making life more affordable for Missouri families.
Adding even more wind to the legislature’s sails, the Missouri GOP’s Executive Council last week voted unanimously to support the drive to take the state’s 4.7% top income tax rate all the way to zero.
If Gov. Kehoe and Missouri lawmakers are able to enact legislation that phases out their state income tax, they will join the growing number of states that have already done so in recent years (Oklahoma, Mississippi, West Virginia, and Kentucky), as well as get ahead of the states that are in the process of doing so (Arkansas, South Carolina, North Carolina, Iowa, Georgia, and others). It’s understandable that lawmakers in so many states are working to join the club of no-income-tax states, which currently has eight members. No-income-tax states have outperformed the rest of the nation for a long time when it comes to job creation, as well as economic and personal income growth.
“Americans for Tax Reform strongly supports the Missouri legislature and Governor Kehoe in their efforts to make Missouri the next zero-income-tax state, putting workers and families first — not government bureaucrats,” said Grover Norquist, president of Americans for Tax Reform. “Not only will an income tax phaseout make Missouri more affordable and competitive with neighbors like Oklahoma and Tennessee, but it will also attract families and individuals fleeing high tax blue states, inject new investment dollars into the state economy, and spur economic growth for decades to come.”
Even with their existing advantage, lawmakers in no-income-tax states like Florida, New Hampshire and Texas have been finding other ways to provide tax relief in recent years that make their tax climates even more attractive, making the success of Gov. Kehoe’s effort all the more imperative. Missouri is bordered by one no-income-tax state, but three other neighboring states are now on track to eliminate their income tax.
“We’ve got a well thought-out plan, and anytime you can let Missourians keep more money in their pocket, it’s always better than the government spending it, any day,” said Governor Kehoe of the Missouri GOP’s plan to phase the income tax rate to zero.
Americans for Tax Reform will continue to vocally support Gov. Kehoe’s effort to make Missouri a leader, not just a participant, in the nationwide movement to phase out state income taxes.
