JEFFERSON CITY — The Missouri House added a new wrinkle to already bumpy budget negotiations Wednesday, approving a series of tax cuts that will reduce state revenues by more than $420 million.

Facing a Friday deadline to finish work on the state’s $50 billion spending plan, the Republican-controlled House sent Gov. Mike Kehoe legislation allowing Missourians to deduct 100% of all capital gains income reported on federal taxes from their state income taxes.

Capital gains are profits made on the sale of assets — land or stocks, for example — which have increased in value over the holding period.

The measure also would increase income limits and credit amounts for the property tax relief program known as “circuit breaker” as well as exempt diapers and feminine hygiene products from sales tax.

Republicans cheered the cuts, which are expected to be enacted by Kehoe.

“Eliminating capital gains taxes in Missouri will free up capital (for) more productive uses,” said Rep. George Hruza, R-Des Peres.

“We should be happy and proud about this,” added Rep. Wendy Hausman, a St. Charles County Republican, who said it will help families save money on diapers.

Democrats urged caution, saying state revenues are flattening, federal dollars are drying up and tariffs imposed by President Donald Trump could send the economy reeling.

“I’m not sure our budget can afford that,” said Rep. Kemp Strickler, D-Kansas City.

“This bill absolutely stinks,” added Rep. Del Taylor, D-St. Louis.

The measure, which has already won Senate approval, was approved on a party line 102-41 vote. Ten Democrats voted “present,” including Reps. Steve Butz and Nick Kimble of St. Louis and Michael Burton of Lakeshire.

Kehoe said he is a “big fan” of the capital gains proposal.

“It’s a big issue to agriculture families. I’m glad they got it through,” Kehoe told reporters after the House vote.

The looming reduction in state revenues will play a role in the final round of budget talks between negotiators in the House and Senate.

A meeting between legislative budget writers to iron out differences in the blueprint was set to begin at 9 a.m. Wednesday, but House Budget Committee Chairman Dirk Deaton postponed the session until 10 p.m. Wednesday.

The Seneca Republican blamed the delay on Senate Appropriations Committee Chairman Lincoln Hough, R-Springfield, saying the two had not held fruitful discussions about a compromise plan.

“The Senate walked away yesterday from our talking about the conference,” Deaton said.

Deaton would not offer details about any sticking points, but the Senate version of the budget includes $300 million more for school funding and erases a $50 million plan by Kehoe to fund a major expansion of the state’s school voucher program.

“The whole budget has to fit together at the end. It’s not any one thing,” Deaton said. “The goal has always been to have a fiscally responsible budget.”

The delay sets the stage for a possibly dramatic two days of scrambling by lawmakers to meet a 6 p.m. Friday deadline to send Kehoe a budget for the fiscal year beginning July 1.

“In the end it’s one big agreement and we’re not there yet,” Deaton said. “I know time is short.”

Failure to reach an agreement by Friday would trigger a special session, which would cost taxpayers additional money.

Kehoe, a former state senator, said he wouldn't be inserting himself into the dispute.

“They need to work through what they are going to do,” the governor said.

Hough could not immediately be reached for comment.

The Senate spending plan is larger than the one adopted by the House last month and it grew more on Wednesday after the appropriations panel reviewed a separate package of brick-and-mortar projects.

New capital spending in the proposal tops a half of a billion dollars, up from Kehoe’s proposed $329 million construction plan. The House had settled on projects worth $401 million.

Included in the proposed spending is $20 million to continue a program designed to make railroad crossings safer in the wake of a deadly 2022 Amtrak crash in Mendon, Missouri.

It also includes nearly $16 million for renovations at the Jefferson Barracks National Guard center in south St. Louis County and $9 million for flood plain issues in west suburban Maryland Heights.

The Senate version offers $20 million to help Cape Girardeau redevelop the historic Haarig Commercial District, up from the $11 million set aside by the House.

When negotiations resume, budget writers will square off on the Senate’s decision to fully fund the formula that determines how much money school districts receive from the state.

The House sided with Kehoe on a plan that shorts the formula by $300 million after the governor said he believes the process needs to be revamped. The Senate added the money back in.

The fight over school funding was highlighted by the inclusion in the House negotiating team of Democrat Rep. Marlene Terry of north St. Louis County, who has sided with Republicans on school choice bills.

Her support could help the House and Kehoe in their quest to expand the school voucher program, where $50 million in taxpayer funds could be used to pay for private school tuition.

Other differences facing lawmakers include a Senate plan to increase funding to state universities and colleges by 3%, up from the House level of 1.5%.

The Senate version also sides with Kehoe on a plan to give long-time state employees raises worth up to 10%, up from the House plan which caps raises at 5% based on longevity.

The negotiations and tax cuts come as the state continues to have a surplus of general revenue nearing $4 billion at the end of April.

The tax cut legislation is House Bill 594.

Ezra Bitterman of the Post-Dispatch contributed to this report.