Can MO afford to lose $85 million a year? (Kansas City, Jefferson City: credit, house)

[RichMonk]

The corporate welfare rolls on ahead. Gov. Nixon signed in to law a bill that would remove the franchise tax (a 1/30th of 1% tax) for businesses worth over $10 Million. Don't we cut taxes when we have surpluses? Not when we are running $700 million in the red, wait, make that $785 million.

http://www.mobudget.org/files/Govern...-4-26-2011.pdf

Many will claim that it creates jobs but history just doesn't support this theory. The Bush tax cuts did not create any jobs, we lost them. Plus, as we've seen in the recent recession, corporations, during tight times, take government incentives (tax cuts, bail outs) and SAVE that money. They don't invest it, they sit on it while the rest of us waiting for the trickle to come on down see nothing.

[MUTGR]

For the other side of the story on what is apparently a bipartisan effort:


Nolte: Governor Signs Missouri Business Tax Relief Plan

Featuring 96-SB19, H033 Jerry Nolte

JEFFERSON CITY, Mo. – There will be one less hurdle for businesses to expand and hire more workers thanks to legislation advanced by Representative Jerry Nolte which was signed into law today. Gov. Jay Nixon signed the legislation (SB 19) that was handled in the Missouri House by Rep. Jerry Nolte, R-Gladstone, that eliminates the state’s corporate franchise tax. The legislation, which would phase out the franchise tax over a period of five years until it is repealed entirely in 2016, is similar to another bill sponsored by Nolte (HB 76) that was approved by the House earlier this year.

“This is a great day for Missouri businesses as we eliminate an unnecessary tax and remove an artificial barrier that for years kept some businesses from expanding and hiring more workers,” said Nolte.

The late Senator Harry Wiggins (D-Kansas City), a strong advocate of eliminating the franchise tax, described it as “a tax businesses pay for the privilege of paying other taxes.” The franchise tax, which is a tax on a corporation’s assets such as inventory and buildings, is a “temporary tax” in existence since 1917. While the legislature has reduced the tax over the years, leading business organizations have proposed doing away with the tax entirely as part of the “Fix the Six” legislative package. Nolte’s bill will reduce the tax each year until it is phased out entirely in 2016.

“Lowering the tax burden will make our state a more attractive location for businesses that seek to relocate and it will make it easier for existing businesses to grow,” said Nolte. “We must remain competitive with states like Kansas, which recently repealed its franchise tax. By lowering our tax burden we will send a strong message that Missouri is open and ready for business.”

Nolte said Missouri is one of only a few states that have both a corporate income tax and a corporate franchise tax. He said eliminating what is, in effect, double taxation would put Missouri on a level playing field with other states that are competing to attract new businesses and jobs.

The legislation will go into effect August 28.

[RichMonk]

There is something to be said for keeping in competition with KS, however, tax cuts during budget short fall just doesn't make sense to me. I find it hard to believe that this tax is a real burden or hindrance to hiring on individual businesses worth over 10 million (they would owe about 3 grand per year) in taxable value.

When they repealed the franchise tax for small businesses, that actually made a lot of sense to me. Small busineses hire more people per dollar earned and are less likely to put that extra cash in savings over investing in growth.

Why is it that big business needs tax cuts? They aren't struggling. I work for one of those companies and we have no issues hiring with the tax in place. In fact, we are in the middle of a flurry of hiring.

Just because it is bipartisan does not make it good for Americans. The U. S. Congress has, with bipartisan support, allowed the fleecing of the American public for the sake of the most profitable and wasteful corporations who would sooner send my job to India.

Are there any tax increases to cover this? Or, which services are being cut or scaled back? I doubt there is a tax increase coming. This can only mean a cut in something else. I hope that something unnecessary is being cut, but in a state that is already low tax & low service, what is left?

[MUTGR]

Originally Posted by RichMonk

There is something to be said for keeping in competition with KS, however, tax cuts during budget short fall just doesn't make sense to me. I find it hard to believe that this tax is a real burden or hindrance to hiring on individual businesses worth over 10 million (they would owe about 3 grand per year) in taxable value.

When they repealed the franchise tax for small businesses, that actually made a lot of sense to me. Small busineses hire more people per dollar earned and are less likely to put that extra cash in savings over investing in growth.

Why is it that big business needs tax cuts? They aren't struggling. I work for one of those companies and we have no issues hiring with the tax in place. In fact, we are in the middle of a flurry of hiring.

Just because it is bipartisan does not make it good for Americans. The U. S. Congress has, with bipartisan support, allowed the fleecing of the American public for the sake of the most profitable and wasteful corporations who would sooner send my job to India.

Are there any tax increases to cover this? Or, which services are being cut or scaled back? I doubt there is a tax increase coming. This can only mean a cut in something else. I hope that something unnecessary is being cut, but in a state that is already low tax & low service, what is left?

Frankly, I wasn't really aware of this legislation until I read your post.
On the merits, it sounds like Missouri had both a franchise tax on assets and a corporate income tax, whereas most states apparently don't have both. So, conceptually, I don't have a problem with the legislation. Employers do decide to relocate or not locate in a state in the first place based on factors including overall tax burden and regulatory scheme. I also know that overall the US places a very high tax burden on corporations compared to many other countries.

Government at all levels is going to have to find a way to cut spending.

[RichMonk]

Originally Posted by MUTGR

I also know that overall the US places a very high tax burden on corporations compared to many other countries.

Government at all levels is going to have to find a way to cut spending.

That is true on the books (40%) but the effective tax rate (~25-27%) of US corporations is lower than most other developed countries.

From the Government Accountability Office:

"Statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income." In the report, GAO estimated that "[t]he average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent."

According to World Bank, we have the highest statutory corporate tax rate on the books among G8 and BRIC countries. However, what corporations really end up paying is the effective tax rate which is lower than all except Russia France and the UK.

----

I agree, cuts need to be made but not across the board. The boat was sailing just fine with all the privileges and benefits of being an American. Then, an explosion of spending in defense and security after 9/11. 263 new agencies, all focused on terrorism, all with inflated budgets, all mostly unsuccessful. Now we find that the job is done better with just the good old CIA, NSA and US Military working together. Osama bin Laden, while dead, is still on his way to achieving his goal of bankrupting America through paranoia and corruption. The longer we let this pipeline of cash stay open the more that bastard wins over us.

The richest counties in the US are in the DC Metro and they are all that way because of fat and bloated defense companies that lie and cheat their way to American tax dollars and then walk out the front door leaving their congressman a tip.

For an in depth look at the ruinous spending our government has committed, supposedly on our behalf, read Top Secret America (Top Secret America | washingtonpost.com).

You want to fix the deficit? It is so freaking straightforward. End government corruption and cronyism in the defense spending. Obama and congress haven't really made an effort at addressing this huge spending problem. We can do all we are doing now, in a smaller more efficient manner without every other defense contractor getting their too big piece of the pie.

As for Missouri, I still feel cutting back on state revenue is a bad thing to do right now. The old, out-dated tax can be removed at a later date when the state doesn't have a big red number looming over it.