Senate Gives Final Approval to Phase Out Corporate Franchise Tax.
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Senate Gives Final Approval to Phase Out Corporate Franchise Tax.

Date: April 7, 2011
By: Rebecca May
State Capitol Bureau
Links: SB 19 and the rollcall.

JEFFERSON CITY - The Senate Bill has passed in both the House and Senate and is on its way for Gov. Jay Nixon to sign.

If the Governor signs this bill it will be the first bill he has approved all legislative session.

The tax will diminish within the upcoming five years until it is completely phased out for fiscal year 2016.

The House voted 105-51 on the bill Wed.

Sponsor of the Corporate Franchise Tax bill also known as Senate Bill 19, is R-St. Louis County, Eric Schmitt.

According to Schmitt, Missouri is one of the few states still with a corporate income tax.

"It is really a disincentive to invest or to expand in Missouri so we thought it was time for this antiquated tax to be phased out over five years," said Schmitt.

Supporters also say eliminating this tax will make Missouri more attractive to businesses and encourage them to expand without the concern of being taxed for working within the state.

The Missouri Chamber of Commerce noted Missouri at a disadvantage to neighboring states who do not have both a corporate franchise tax and a corporate income tax. States with no corporate franchise tax include Indiana, Minnesota, Ohio and Texas. Idaho and Nebraska have the choice to either pay a corporate income tax or a franchise tax not both.

If the Governor signs this legislation, Missouri will follow a similar path to Kansas who will have phased out the tax completely by this year.

However, opponents of the bill say eliminating this tax will affect all Missourians because there will be millions lost for the state.

The Corporate Franchise Tax produced $87.5 million for Missouri in fiscal year 2009.

The opponents, who are a majority of Democrats, say there is a no promise of more business in Missouri.

According to Democratic Floor Leader, Mike Talboy, D-Jackson County, phasing the tax out will put Missouri in a $84 million shortfall.

"By the sponsor's own words, has no idea if it's going to come in. I think that's a dangerous game to play especially in this economic time," said Talboy.

However, Budget Committee Chair, Republican Rep. Ryan Silvey said the budget had been perfected for this type of phase out.

Silvey also said the phase out will not take effect until 2013, and by then he said more businesses will have expanded.

Senate Bill 19 is the first of the "Fix the Six" initiative to pass. The Missouri Chamber of Commerce along with other corporate groups have put together the "Fix the Six" agenda earlier this legislative session. The purpose of the six-part initiative is to reinvigorate state business in Missouri.

The Missouri Chamber of Commerce has been pushing for the phase out of franchise taxes more than a decade.

Currently, businesses will only be taxed if they make more than $10 million. Opponents also said this is discriminatory against businesses in different areas, specifically urban versus rural.

Talboy said Corporate Income Tax maybe next on the chopping block to bring in more business.

"It's another debate that we have heard on the floor for a couple of years and I think we are the lowest of the state's that have a corporate income tax, and the only state's that are beating us are state's with no corporate income tax," said Talboy.