Individuals and corporations will be beneficiaries of a tax cut approved May 17, as the Missouri General Assembly ended its regular session.
Under Senate Bill 884, the corporate tax rate will be reduced to 4 percent from 6.25 percent by Jan. 1, 2020.
“It’s a bit of a delayed implementation, but as we are looking at the impacts of the federal tax reform, that is just the position that everyone sort of agreed on as being the most prudent way to do it,” said Matthew Panik, vice president of governmental affairs with the Missouri Chamber of Commerce and Industry, on a May 23 conference call
The bill was sponsored by Sen. Andrew Koenig, R-St. Louis.
A proposed cut that would have reduced the rate to 3.5 percent had to be modified in the last week of session, after the House of Representatives received calculations from the Missouri Department of Revenue.
“Just to be safe on the revenue side, everyone agreed to come up to the 4 percent,” Panik said.
“That’s still a huge win for Missouri businesses. As we look at competition among the states, we’ll only be higher than North Carolina in terms of states that have a corporate income tax.”
Corporate taxes are collected in 44 states, according to independent tax policy research organization The Tax Foundation, with North Carolina’s rate on businesses currently at 3.5 percent, Panik said.
Individual income tax rates will also get a reduction, following the passage of House Bill 2540, sponsored by Speaker Pro Tem Elijah Haahr, R-Springfield. The bill, approved by a 101-40 vote on May 17, reduces the individual income tax rate to 5.5 percent from 5.9 percent. Additional revenue growth in the state would potentially drop the rate to 5.1 percent, Panik said.
The lower corporate tax rate for Missouri is another positive for businesses, said Matt Bright, controller at Hartman and Co. Inc. The heavy civil construction Springfield company hosted an event May 30 touting the positive impact the federal Tax Cuts and Jobs Act is having for businesses and individuals. Bright said the company was among those able to take advantage of the federal tax cut, allowing it to invest more in its employees through over $30,000 in bonuses and purchasing new equipment for road and bridge projects, while retiring old fleets. The depreciation of equipment required new purchases on occasion, he said, noting costs can be $200,000-$300,000 apiece.
“Those tax deductions and tax reductions have really allowed us to grow our business,” he said. “We keep more money in the business for us to give back to our community and back to our employees, as well.”
Bright declined to provide figures the company saved with the federal tax cut.
He said the state’s corporate tax rate cut is “just a confidence that better things are on the horizon.”
“As far as the state goes, I haven’t really looked at that too much,” he added. “I think that every little bit of that cut will help, though.”
Adding to the workforce isn’t in the immediate plans this year, Bright said, as the company is limited to the number of projects and contracts available. However, he said the low state employment rate – April was at 3.3 percent, according to U.S. Bureau of Labor Statistics – could make it a challenge to find qualified employees to fill the staff.
“There’s no keeping money,” he said. “It just keeps going back into the business and reinvesting it in the employees, new equipment, new facilities and upgrades.”
Right to work
Also in the last week of session, legislators moved to place a right-to-work referendum on the August primary election ballot. The ballot measure, Proposition A, was certified by the Secretary of State’s office after being signed May 24 by Gov. Eric Greitens – days before he resigned from office. Lt. Gov. Mike Parson is set to replace Greitens upon the resignation taking effect June 1.
During the Missouri chamber’s conference call, Panik said the Senate and House worked to move the issue from November’s ballot onto the August ballot. The right-to-work law was statutorily passed as Senate Bill 19 and signed by Greitens in February 2017, but did not go into effect after enough signatures were collected to put the issue onto the ballot as a veto referendum.
A “yes” vote would uphold the law, which bans the mandatory collection of union dues in the state, and a “no” vote would repeal it.
Jeff Phillips, communications and outreach manager for Heavy Construction Laborers Local 663, said he didn’t think it mattered what ballot Proposition A ultimately landed on, as he thinks the issue is wrong for the state. The issue being moved up to August was hardly a surprise to union representatives.
“We honestly had heard whispers of it before the session began,” Phillips said. “We fully expected it to take place.”
With more than 310,000 signatures gathered for a petition to place the measure on the ballot, Phillips said that action signals many people saw the importance of the issue being put to a vote.
“It indicates there’s a very strong feeling against Proposition A and right to work,” he said. “The governor’s support of it wasn’t an issue for some 300,000 people.”
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