Gov. Jay Nixon is expected to sign into law today legislation that would eliminate the corporate franchise tax by 2016.
Proponents, such as the Missouri Chamber of Commerce, say the repeal of the tax would make Missouri more competitive with neighboring states. Opponents, such as the Missouri Budget Project, say that when the law is fully implemented, it would cost the state’s general revenue fund $85 million during a time when budget cuts already are too steep.
“It’s extremely disappointing that the state would eliminate a source of revenue while facing a general revenue shortfall approaching $700 million,” said Amy Blouin, executive director of the Missouri Budget Project, in a news release. “It defies common sense. Elected officials should be looking for balanced approaches to address Missouri’s budget situation, not making the shortfall worse.”
The measure is part of the “
fix the six” agenda outlined by the Missouri Chamber for the 2011 legislative session. The chamber and other business and industry leaders named six legislative priorities that they felt would improve the state’s business climate and help create jobs in Missouri.
Senate Bill 19 incrementally reduces the state’s franchise tax rate before repealing it for the 2016 tax year. It also freezes what businesses are required to pay under the tax, preventing them from paying more than what they paid the previous year.
The House passed the legislation 105-51 April 20, after the Senate passed the bill 28-4 in February.
“Once fully phased out, SB 19 will save Missouri employers more than $80 million annually, money that employers can instead invest in expanding businesses and creating jobs and opportunity for working Missourians,” said Daniel P. Mehan, Missouri Chamber president and CEO, in a released statement.
Missouri's corporate franchise tax is 1/30th of 1 percent and is applied to the face value assigned to stock valued more than $10 million.
The state has levied a franchise tax on corporations' assets since 1917, but the tax has been scaled back in recent years. In 1999, lawmakers passed legislation that eliminated the tax for corporations with $1 million or less in value, and reduced it by one third for all other employers. In 2009, lawmakers exempted businesses with less than $10 million in assets from the tax.
Indiana, Minnesota, Ohio and Texas access no capital-based franchise tax, and Iowa and Kentucky only have the franchise tax for banks and investment companies.
“There is no evidence that Missouri would benefit from the elimination of the corporate franchise tax,” Blouin said in the release. “In fact, most of the benefit would go to shareholders of companies in other states, and the elimination of the corporate franchise tax on an already fiscally stressed state budget could harm Missouri’s business environment and citizens.”
SB 19 would be the first of the “fix the six” priorities to be signed into law, and Mehan said it is coming at a good time for employers.
“These days, we are fighting for every job,” Mehan said in the statement. “Any policy we can implement to help businesses grow and expand our work force is absolutely needed. Ending the corporate franchise tax is one of those positive steps forward.”[[In-content Ad]]
