HCS HB 218 -- CORPORATE INCOME TAX RATE REDUCTIONS

SPONSOR:  Stevenson

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Tax Reform by a vote of 7 to 1.

This substitute authorizes a gradual reduction in the corporate
income tax rate for tax years beginning January 1, as follows:
2008 from 6.25% to 5%; 2009 to 3.75%; 2010 to 2.5%; 2011 to
1.25%; and 2012 and after no corporate income tax will be
imposed.  The substitute authorizes a matching reduction in the
financial institution taxes imposed on banks, credit
institutions, credit unions, and savings and loans associations.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $0 in
FY 2008, $24,200,000 in FY 2009, and $96,800,000 in FY 2010.  No
impact on Other State Funds in FY 2008, FY 2009, and FY 2010.

PROPONENTS:  Supporters say that the bill provides a gradual
reduction in the corporate income tax rate.  Income from
corporations has been declining in recent years with more
businesses being formed as LLC and S corporations.  These are
flow-through entities where the tax is paid by the individual.
Without a corporate income tax, Missouri could attract and keep
large corporate businesses and improve economic development in
Missouri.  Nevada, Washington, and Wyoming have no corporate
income tax, and their sales tax is competitive to Missouri's
rates.

Testifying for the bill were Representative Stevenson; Taxpayers
Research Institute of Missouri; National Federation of
Independent Business; Missouri Chamber of Commerce and Industry;
and Missouri Retailers Association.

OPPONENTS:  Those who oppose the bill say that there is concern
with the revenue impact on the bill since the Department of
Revenue combined reporting of corporate tax and franchise tax.
The actual loss could be $350 million in general revenue funds.
Missouri ranks almost the lowest in the nation being forty-fourth
out of 46 states with a corporate tax.  Once eliminated, the
corporate income tax could not be reinstated without a vote of
the people.  Currently, 5.5% of the total state revenue is from
corporations.  Missouri needs the revenue to continue funding
education, higher education, and the Missouri Medicaid Program.
The bill will lower the current tax credit structure and reduce
the benefits from tax credits.  The historic preservation tax
credits have successfully assisted with the revitalization of
downtown areas across Missouri.

Testifying against the bill were Missouri Budget Project;
Missouri National Education Association; and Missouri Association
for Social Welfare.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:18 am