For our state to prosper, Missouri must remain competitive in attracting businesses. One of the best ways we can do that is by creating a pro-business climate which rewards expansion, and relocation to, our state.
We’ve made strong strides in this regard. In 2010, we passed a measure that phased-out the state corporate franchise tax, what was basically double-taxation. Job creators can now reinvest the extra capitol into their businesses.
However, we must do more. We’re bordered by eight other states, all of which are passing strong incentive packages and lowering the tax burden on companies. No one is suggesting Missouri base all of its policies on those of its neighbors. Each state is unique. What works for one does not necessarily work for the other. Completely ignoring the policies of our neighboring states would be an equally disastrous mistake.
Businesses look very closely at tax policy before locating or moving to a state. If a couple hundred miles makes a significant difference in their tax burden, they will move accordingly. We can’t let that happen.
This week, the Missouri Senate sent to the House a historic tax cut proposal, the biggest overhaul of our tax code in almost a century. If signed by the governor, House Bill 253 would cut personal and corporate incomes taxes.
Under the bill, the personal income tax rate would be reduced by 0.5 percent over 10 years. Corporate income tax would decrease over the same time period by 50 percent and small businesses would be allowed a 50 percent deduction for business income, phased in over a five-year period.
One of the most innovative portions of the bill contains what are known as triggers. Unless revenue collections increase by $100 million over the previous year, the tax cuts aren’t phased in. This is a stop-gap measure in case revenue collections begin lagging. We will only implement these reductions if revenue collections are adequate enough to account for the losses through the cuts. However, the fiscal note on the bill doesn’t take into account the positive economic growth we’ll see from this measure. When the tax relief begins kicking in, revenue collections will likely exceed the benchmarks.
The bill does two important things. First, it puts money back in the hands of job creators. The extra capital they’ll have from reduced taxes can be reinvested into their businesses. It can be used to hire new workers, or increase wages for currents ones. It’ll allow them to expand their markets, and explore new, innovative ideas. Even better, it will overwhelmingly help small business owners, the driving force of our economy.
The legislation will also make Missouri one of the most attractive states for businesses in the country. It will allow us to compete with any other state in the nation in luring new companies to Missouri. It sends a clear message to job creators everywhere that our state is pro-business and fertile ground for growth and expansion.
The tax break passed by the General Assembly is a balanced approach that accounts for a realistic amount of economic growth from the tax relief measure against the reduction of state revenue. And, it requires revenue collections increase before each part of the tax cuts kicks in.
Yes, we’ve got a long way to go. But this measure is one huge step in the right direction.