Legislation that would phase out Missouri’s corporate income tax has been introduced in Jefferson City by state Rep. Travis Smith, R-Dora.
The legislation, weighed by the House Special Committee on Tax Reform on Jan. 31, would see Missouri’s current corporate income tax decrease by 1% until it hits zero.
There currently are two states without any corporate income tax or gross receipt tax. Of those with a corporate income tax, Missouri has one of the lowest rates in the country at 4%.
Smith said that the cut would drive business to the state and allow businesses to reinvest the savings into the state economy and the wages of their workers. The cut also would see a decrease in state revenue of about $700 million over four years, said Smith.
“The corporate income tax is the one most harmful for economic growth,” Smith said.
Rep. Deb Lavender, D-Manchester, said that corporations don’t consider corporate income tax a major factor when moving somewhere; instead, they focus on the quality of the workforce and the general standard of living.
Lavender also said there are other tax cuts that the legislature has passed and warned of the possibility that too many tax cuts would leave the state government with too little revenue.
Rep. Steve Butz, D-St. Louis, also raised concerns about the bill, and said that the majority of small businesses in Missouri are LLCs and S corporations – that is, limited liability corporations or corporations that are taxed as flow-through entities – therefore they do not pay corporate income taxes.
“So, I just wanted to maybe just give you a moment to reflect a little bit about what businesses we would be attracting,” Butz said.
Butz also said that Missouri already has the lowest rate when compared with neighboring states, and that a further reduction would not serve to drive more business to Missouri.
The bill did not go without support, though, as multiple people came to speak in favor of the legislation.
When asked what tangible benefits the state would receive, Smith said that increases to wages and jobs in the state are in part speculative.
“It is a theory, but it’s a theory I believe in,” Smith said.
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