Reform Missouri Corporation Income Tax Immediately, Then Phase It Out In Five Years
The Tax Foundation's 2010 State Business Tax Climate Index ranks Missouri number sixteen for states that offer a low tax business environment. I believe Missouri can rank number one on the Business Tax Climate Index.
The road to Missouri's financial recovery will begin with sweeping changes to the way Missouri does business including extensive revisions to the Missouri Corporation Income Tax. I would like to tell you that I favor immediate elimination of the Missouri Corporation Income Tax as I propose with the Missouri Franchise Tax, but complete elimination of the Corporation Income Tax at this time could mean financial disaster for our State. Missouri revenues in February of 2010 were down 14.6 percent compared to February of 2009 and we are facing an $1,800,000,000 budget shortfall in 2012. Missouri is in a fiscal crisis and we must implement practical legislation now that will increase future sales tax revenues to drive Missouri's economic recovery.
As your State Representative I will introduce legislation that will provide immediate tax cuts for any company that creates a new Missouri job and will ultimately lead to a complete elimination of the Missouri Corporation Income Tax in five years when specific sales tax revenue goals have been met.
By providing immediate tax cuts for any company that creates new Missouri jobs, phasing out the Corporation Income Tax in five years, lowering Missouri business startup costs, simplifying our corporations classifications, rebuilding our business websites, and marketing our business friendly environment, businesses will begin the enormous migration to Missouri. When out of state businesses relocate to Missouri job seekers from other states will follow. The expansion of Missouri's workforce will increase Missouri's population which will lead to enormous increases in sales tax revenue. Increased sales tax revenues will help prevent Missouri's looming financial disaster.
Here is my proposal to reform the Missouri Corporation Income Tax.
Legislators throughout the country have attempted to spur economic growth many times in the past by promising businesses tax cuts for every new job created. Sometimes this method has generated economic growth and other times it hasn't. I believe using this method along with other practical tax reductions & business growth incentives will motivate Missouri based businesses to expand, will attract businesses from all over the country to Missouri, and create thousands of new Missouri jobs. This proposal is similar to Nevada's Tax Code but I want Missouri's tax reforms to be much more aggressive.
Missouri's current Corporation Income Tax is 6.25 percent of a corporations taxable income. Missouri law also allows a business to deduct up to 50 percent of Federal taxable income which effectively reduces the taxes most Missouri businesses pay to about 5.25 percent.
As your Missouri State Representative I will introduce legislation that will permanently reduce Missouri's Corporation Income Tax by 1 percent for every 10 new jobs a company creates. This tax credit will apply equally for any company already based in Missouri or for any out of state company that relocates their business to Missouri. This legislation will encourage growth and expansion for companies already based in Missouri and will also provide an incredible incentive for any company located in another state to move their business to Missouri.
For example, if any company creates 10 new jobs in Missouri, they will receive a permanent 1 percent reduction of their Missouri Corporation Income Tax. This would permanently lower their tax rate to 4.25 percent. Remember, Missouri allows a business to deduct up to 50 percent of Federal taxable income which reduces the average tax bill from 6.25 to 5.25 percent. If a company creates 30 new Missouri jobs, their tax rate would be permanently lowered to 2.25 percent. The unending tax credit would be prorated to the exact percentage for each employee hired. So if a company hires one person they will receive a permanent tax credit of .1 percent which would lower there tax rate to 5.15 percent. If a business creates 3 new Missouri jobs their Corporation Income Tax would be permanently lowered by .3 percent to 4.95 percent. Any company in Missouri that wants to completely eliminate their Missouri Corporation Income Tax would only need to create 53 new Missouri jobs. If any company located in another state wants to completely eliminate their Corporation Income Tax, they will need to bring 53 employees to Missouri.
This legislation offering tax credits for every job created is similar to the Missouri Quality Jobs Program but is much more aggressive and much less restrictive. The Missouri Quality Jobs Program offers companies a sales tax credit for businesses that have met certain job creation requirements. These tax credits are not applicable to many Missouri businesses such as retail stores, restaurants, educational institutions, religious organizations, biodiesel production companies, ethanol production companies, biodiesel production companies, and many other business entities. To qualify for tax credits under the Missouri Quality Jobs Program a business must also offer health insurance to every employee while paying 50 percent of the premium. This health insurance requirement of the Missouri Quality Jobs Program can basically eliminate any tax benefits by requiring the payment of 50 percent of any employees health care benefits. The Missouri Quality Jobs Program has been an excellent job creation program for Missouri but does have significant restrictions. The legislation I introduce will offer tax credits for every job created regardless of the type of business and without any binding limitations. Under my legislation if you create a job in Missouri, no matter what type of job, you will receive permanent tax credits. This will create Missouri jobs.
As I stated above, I would love to tell you I will permanently eliminate the Missouri Corporation Income Tax if you send me to Jefferson City. But any legislation that does away with the Missouri Corporations Tax in 2011 is not realistic and would likely never make it past the Tax Reform Committee. If it did somehow make it beyond the Tax Reform Committee any bill calling for the immediate elimination of the Corporation Income Tax would surely die a quick death on the House or Senate Floor. Missouri, like most states, is facing severe budget shortfalls. If we eliminate the Corporations Income Tax at this time, we would drive up our budget deficit, create a huge shortfall in operational funding, and would place Missouri in financial peril.
We can, however, plan for our future economic recovery with a feasible proposal to reduce the Missouri Corporation Income Tax in yearly increments when certain financial conditions have been met, leading to it's complete elimination. Michigan, Nevada, South Dakota, Washington, and Wyoming have eliminated their corporation income tax leading these states to the top of every internet business ranking poll. Removal of this tax will lead to the growth of Missouri companies and make Missouri much more attractive to out of state businesses.
As your Missouri State Representative I will introduce legislation that will modernize Missouri's business websites, reduce surety bond requirements, simplify the corporations process, abolish the Missouri Franchise Tax, give tax credits to every company that creates a new Missouri job, and begin an aggressive internet marketing campaign to publicize Missouri's business friendly environment. My vision to build Missouri into our Nation's best state for business will motivate Missouri businesses to expand and attract out of state businesses to Missouri on a level we have never experienced. Developing Missouri into the economic capitol of the United States will also lure a huge new workforce. Thousands of people could relocate to Missouri for the new high paying jobs and this new wave of population growth will lead to enormous increases in Missouri sales tax revenue. To further entice business growth & development, I propose eliminating the Missouri Corporation Income Tax in five years when specific sales tax revenue goals have been met.
Here is my plan to phase out the Missouri Corporations Income Tax in five years.
Missouri's operating budget requires about twenty three billion dollars a year that is generated by Federal Funds, State Earmarked Funds, and the State's General Revenue which includes all State taxes. Missouri receives about 1.8 billion dollars a year from sales tax and about 400 million dollars from the Corporate Income Tax. I propose we drop the Corporation Income Tax by one percent for every sales taxrevenue increase of 75 million dollars.
For example, when the State's sales tax revenue increases from $1,800,000,000 to $1,875,000,000, the legislation I introduce will permanently decrease the Missouri Corporation Income Tax by one percent, reducing it from 5.25 percent to 4.25 percent. When sales tax revenues increase another $75,000,000 to $1,950,000,000, the Corporation Income Tax will drop another one percent to 3.25 percent. When Missouri sales tax revenues reach $2,175,000,000, Missouri's Corporation Income Tax will be permanently eliminated with absolutely no losses in tax revenue. I believe the economic growth that is in store for Missouri will generate record sales tax revenue increases that will allow the permanent elimination of the Corporation Income Tax in five years. If these specific sales tax goals are not met within five years, it may take longer to phase out the Corporation Income Tax. Missouri is facing a financial crisis and we cannot risk eliminating the Corporation Income Tax until the income it generates can be replaced by increased sales tax revenues. If the sales tax goals are met ahead of the five year objective, the Corporation Income Tax would be eliminated sooner. My five year plan to phase the Missouri Corporation Income Tax is practical, fiscally responsible, and presents no financial risk to the State.
If I am elected your Missouri State Representative in 2010, my first fiscal budget year will begin in July of 2011 and the legislation I introduce should eliminate Missouri's Corporation Income Tax by the 2016 budget year. Eliminating this tax will help us embrace Missouri companies and let them know we appreciate their business while enhancing Missouri's image to the thousands of businesses that are relocating to new states. This will create thousands of new Missouri jobs.
The Tax Foundation ranked Missouri number sixteen for states that offer a low tax business environment. With the right legislation, I believe Missouri's future holds the number one ranking.