Federal Tax Bill Expected To Cut Missouri Revenues By At Least $170M

The House of Representatives passed the "One, Big, Beautiful Bill" (TOBBB), proposing significant federal tax changes including permanently extending and increasing the SALT cap from $10,000 to $40,000 for many taxpayers starting in 2025, while limiting certain professional service industries' ability to circumvent this cap through pass-through entity tax elections. This legislation, supported by President Donald Trump, is expected to result in substantial state revenue reductions, particularly impacting Missouri, where estimates suggest losses of at least $170 million and potentially up to $429 million, due to the interplay between federal tax changes and state tax conformity. The bill also includes provisions that could increase federal standard deductions, providing tax relief to many Missourians but simultaneously straining state budgets. Critics warn that the bill disproportionately benefits wealthier households and corporations while threatening funding for essential programs such as Medicaid and food assistance, which could force local governments to cover rising costs, especially in healthcare and rural hospital support. Local governments across the country face fiscal instability from these federal tax reforms combined with state tax cuts and the expiration of pandemic aid, prompting calls for stronger local revenue tools and advocacy against harmful federal tax changes. Missouri officials are concerned about the state's budget outlook amid these challenges, with Governor Mike Kehoe highlighting the difficulty of future revenue shortfalls while the legislature considers large tax incentives for projects like sports stadiums.