Missouri Bill Would End Corporate Income Tax

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By Christopher Brown

A Missouri tax committee will take up its chairman’s proposal to eliminate the state’s corporate income tax at its opening hearing of the 2017 legislative session.

The bill, S.B. 17, would reduce the corporate income tax rate from the current level of 6.25 percent to 4 percent in 2017 and 2 percent in 2018, before eliminating it in 2019.

S.B. 17 was pre-filed in December by Sen. Will Kraus (R), chairman of the Senate Ways and Means Committee, which will consider the bill at a Jan. 10 hearing, along with a proposal to eliminate sales tax on delivery charges.

Competing for Jobs

In a statement released before Christmas, Kraus said that eliminating the corporate income tax would help Missouri compete for businesses and jobs in a national climate in which there is a “continued emphasis on bringing businesses and investments back to the United States.”

“Our ultimate goal is to increase job growth in the Show-Me State, and S.B. 17 is one way we can help market Missouri as a corporate tax-free state to new and relocating businesses,” he said. Kraus added that the tax, which accounts for 3 to 4 percent of the state’s revenue, “does not create a significant amount of revenue relative to the entire state budget.”

Kraus previously told Bloomberg BNA that the likely annual revenue impact of eliminating the corporate income tax would be $350 million.

Budget Woes

But a proposal to reduce the state’s revenue on that scale could encounter pushback, given the state’s current difficult fiscal climate. Lawmakers are waiting to see how much more incoming Gov. Eric Greitens (R) will have to trim from a state budget that was already pared back by $200 million during the second half of 2016 by outgoing Gov. Jay Nixon (D). Greitens’ spokesman told reporters recently that the governor will reveal his budget proposals shortly after taking office Jan. 9.

Lawmakers also are aware that a scheduled round of tax cuts that were part of a 2014 tax cut package, but which have yet to take effect, will eventually cut annual revenue by around $620 million. Rep. Scott Fitzpatrick (R), chairman of the House Budget Committee, told Bloomberg BNA that the combined effect of the state’s budget challenges and the unrealized impact of the 2014 tax cuts would likely diminish the Legislature’s interest in significant tax cuts during the 2017 session.

According to the Tax Foundation, if Missouri does reduce or eliminate the corporate income tax, it will join a recent trend that saw five states—Arizona, Indiana, New Mexico, New York and North Carolina—cut their rates for 2016.

Passage of S.B. 17 in its current form also means Missouri would join two other states in having neither a corporate income tax nor a gross receipts tax. The states on that short list are South Dakota and Wyoming.

Delivery Charges

At the Jan. 10 hearing, the committee also is to consider S.B. 16, a bill that would exempt delivery charges from the state sales tax.

S.B. 16, introduced by Kraus, would roll back a decision of the Missouri Supreme Court that charges for delivery of a rented crane were subject to tax because the parties intended delivery to be part of the crane rental ( Alberici Constructors, Inc. v. Dir. of Revenue , Mo., No. SC93771, 1/13/15 ).

Kraus said in a statement that the Alberici ruling had opened the door to the imposition of the sales tax on delivery charges, and that S.B. 16 would restore the rule previously used by the Department of Revenue under which delivery charges that were separately stated on an invoice weren’t subject to sales tax.

To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of S.B. 17 is at http://src.bna.com/lgg.

Text of S.B. 16 is at http://src.bna.com/lgi.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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