(The Center Square) – In the stack of more than 80 bills the Missouri House of Representatives voted to send to the Senate is an effort to phase out the corporate income tax and end tax credits.
If the Senate passes House Bill 2274 as it currently is written, the corporate tax rate would decrease from 4% to 3% on Jan. 1, 2025, drop to 2% in 2026, 1% in 2027, and no corporate tax would be imposed in 2028 and thereafter. The bill was first read in the Senate in late March and no other actions have been taken.
The bill’s fiscal note reported the state’s general revenue would drop $99 million in fiscal year 2025, $320 million in 2026, $541 million in 2027, and $884 million when fully implemented in 2029.
The bill also would stop new tax credits for corporations. The Office of Budget and Planning reported approximately $90 million in tax credits were taken during fiscal years 2021 through 2023. Between $95 and $115 million in tax credits were claimed from 2017 through 2020.
Missouri and Oklahoma have the second-lowest corporate income tax rate in the nation with North Carolina’s flat rate of 2.5% the lowest, according to information from the Tax Foundation. Eight other states have top corporate income tax rates at or below 5%.
Rep. Travis Smith, R-Dora, and the bill’s sponsor, said eliminating the corporate income tax would ultimately benefit workers and consumers.
“It’s because the corporation is not paying those taxes and they’re putting [money] back into improving their facilities and paying the wages,” Smith said before the House voted 100-50 along party lines to pass the bill.
Democrats argued eliminating the corporate income tax wouldn’t provide a substantial incentive since Missouri’s rate is lower than surrounding states.
“Where I struggle with it is why compete against yourself,” Rep. Steve Butz, D-St. Louis, said during floor debate. “We’re already a low-tax state. I try to make this argument and, sure you don’t like corporate income tax. I get it. But we have gentlemen over here who don’t like personal property tax and somebody else doesn’t like real estate tax and we would like to reduce sales tax on food. I get it, but it’s that balance.”
Other Democrats questioned the fairness of the bill.
“I believe – and I hope that others around here believe – that corporations should actually pay for some of the services that they use in this state,” Rep. Kemp Stricker, D-Lee’s Summit, said before the vote. “Yes, the corporations are owned by shareholders and some of them are our constituents. Many of them are also out-of-state constituents and I believe they should pay for some of those services we provide as a state.”
Republicans stated elimination of the tax would help consumers and businesses.
“I remember listening to President Ronald Reagan [say] that whenever you tax businesses or you raise the minimum wage or any of those things, that’s a pass-through cost,” Rep. Barry Hovis, R-Whitewater, said before the vote. “You’re passing that on to the customer, which raises our cost of being able to live. It makes the hamburgers more expensive.”
