JEFFERSON CITY — Missouri has one of the lowest corporate income tax rates in the country, but a bill proposed by Sen. Denny Hoskins, R-Warrensburg, would phase out the 4% tax by 2027.
A …
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JEFFERSON CITY — Missouri has one of the lowest corporate income tax rates in the country, but a bill proposed by Sen. Denny Hoskins, R-Warrensburg, would phase out the 4% tax by 2027.
A law passed in 2018 reduced the corporate income tax from 6.25% to 4% beginning in January 2020. The proposed cut would reduce the tax by 1% each year until it is eliminated.
The legislature during a special session in October 2022 cut individual income taxes. Gov. Mike Parson recommended then that the corporate tax cut wait until the regular session.
Sen. Doug Beck, D-St. Louis County, questioned Hoskins about the timing of the bill.
“We just passed a tax break,” Beck said. “Do you think it’s wise to do another tax cut at this time for corporations that will actually shift more of the burden to the middle class and the working folks?”
Hoskins countered that the tax cut would motivate businesses to move to Missouri. Additionally, a tax cut could allow businesses to “reinvest that money into employee wages or to do more research and development for innovative products,” Hoskins said.
The state collected over $711 million from the corporate income tax in fiscal year 2022. A residual effect of the bill would be the loss of a franchise tax on financial institutions such as banks. This tax generates about $52 million for the state, momey that is usually appropriated to local governments.
A loss of $711 million in the annual budget is roughly the equivalent of of losing the entire proposed education budget for next fiscal year.
Brian Colby, vice president of public policy for the Missouri Budget Project, cautioned the senators against another tax cut as Missouri already has one of the lowest corporate tax rates in the country. Another witness in opposition to the bill said that while Missouri is “flush” with federal funding, this will not always be the case, and he cautioned legislators that they have not budgeted with such low tax rates before.
According to data referenced by Hoskins, Oklahoma ties Missouri with a 4% corporate income tax rate. North Carolina has the lowest rate at 2.5% while South Dakota and Wyoming are the only states with no corporate income tax.
