Business Climate and Economic Conditions

Every state pitches itself as business-friendly. Missouri decided to prove it, in the most literal way a government can: by giving up tax revenue on the spot.

Last year, Gov. Mike Kehoe signed House Bill 594, making Missouri the first state in the nation to fully exempt individual filers from capital-gains tax. Anyone who sells stock, a business, a rental property or cryptocurrency for a profit can now deduct 100 percent of that federally reported gain when calculating Missouri taxable income—retroactive to Jan. 1, 2025, and first showing up on returns filed this year. Corporations are next in line, though not yet: the break extends to them only once Missouri’s top individual income tax rate falls to 4.5 percent, a threshold the state hasn’t reached.

The fiscal cost is real, if smaller than the ambition might suggest—the Department of Revenue projects roughly $157 million off this year’s general revenue and about $111 million annually after that. Financial advisers across the state describe the move in blunter terms. One Kansas City-area adviser called it “revolutionary” earlier this year, noting he’d never seen the move made anywhere else. The practical effect: succession planning, business sales and real-estate exits that once carried a Missouri tax cost, now don’t.

That was just the opening move. And while Kehoe didn’t get the next step of his envisioned rebuild (voters in August roundly rejected his call to phase out the individual income tax entirely over roughly five years) the capital-gains exemption stands on its own as the headline achievement of a tax code that hadn’t been substantially rewritten since 1931.

Supporters frame the pairing as one continuous strategy: tax the sale of things once, tax the earning of a paycheck not at all, and let sales tax carry more of the load. Critics—including the state’s association of real-estate professionals, which helped defeat a related sales-tax expansion effort a decade ago—argue the amendment doesn’t specify how the state replaces the revenue, and that a heavier sales tax lands hardest on people who spend most of what they earn. Both arguments will get a full airing before Missourians vote.

None of this happened in a vacuum. The Legislature also locked in the state’s $15-an-hour minimum wage on Jan. 1, 2026—the second and final step of the wage increase voters approved in 2024—while stripping out the automatic annual adjustment tied to inflation that voters had also approved. Future changes to the wage floor now require another vote or another act of the Legislature, not a formula. Retail and service businesses with less than $500,000 in annual gross income remain exempt from the state minimum and fall back to federal wage law. It’s a genuinely two-sided outcome: a higher wage floor locked in, paired with employers regaining a say in what comes next.

The fundamentals underneath all of this remain the state’s quieter selling point. Missouri’s real GDP hit $357.97 billion in 2025, up 1.3 percent from the year before and good for 22nd nationally, according to the Bureau of Economic Analysis. Unemployment sat at 3.8 percent in May 2026, half a point below the national rate, and Missouri’s labor force participation rate—63.4 percent—has run ahead of the national figure for more than a decade. Add central geography, a work force that shows up, and now a tax code betting on keeping more of what residents earn and sell in their own pockets, and the pitch to employers gets simpler every year.

There’s a border-war subplot worth watching, too. Kansas has leaned on incentive packages—including an offer north of $1.8 billion aimed at luring the Chiefs to the Sunflower State—to compete for Missouri’s marquee assets.

Financial advisers on both sides of the state line say the capital-gains exemption is already changing where wealthy households choose to domicile trusts and when to time major sales. For a state that spent decades being told its best asset was simply standing in the geographic middle of the country, Missouri is now making a very different argument: that the middle of the country is also where the tax code makes the most sense.

PUBLISHED AUGUST 2026