Last Tuesday the Missouri Senate passed an $85 million dollar corporate tax cut. The legislature, in its infinite wisdom, believes that this cut is desirable even though we read daily that the state is hemorrhaging revenue and drastic budget surgery is required.
Specifically, the lege passed a bill that would cap and phase-out the state’s franchise tax on large corporations. Franchise taxes are corporate taxes that are based on a calculation of the worth of a company’s assets rather than its income. Generally they are levied at higher rates by states with low or no corporate income tax, and are not levied or are levied at low rates in states with high corporate income taxes. However, Missouri’s corporate income tax rate is relatively low and so has been the franchise tax rate.
The Missouri legislature has done nothing to offset the revenue lost from this corporate tax cut. And this is significant. Why? Because, according to the budget cutters in Missouri’s statehouse, we’re so broke that we’re going to have to jettison the poor and helpless who depend on the state’s safety net. Massive cuts have been proposed to transportation, education, and health and human services – in a state where these sectors were already poorly funded.
The justification for this tax cut is, as always, the claim that low taxes create jobs – despite the fact that there is little or no evidence to support this claim. As noted above, Missouri’s corporate taxes are already very low in comparison to dozens of far more prosperous states, and this generosity to the corporate sector has done little or nothing to spur job growth. That inconvenient fact has not, of course, stopped the see-no-facts, hear-no-facts, speak-no-facts Missouri GOPers from repeatedly dragging out the discredited tax-cuts-equals-jobs mantra to justify tax breaks for the well-connected. Sadly, though, saying it’s so doesn’t make it so.
Often the job creation mantra involves invocations of “small business” which can usually be relied upon to stimulate reverence and silence critics. However, that can’t be the issue this time since in 2009, the legislature, with the support of Governor Nixon, passed a jobs bill, that, by rasing the asset cap from $1 million to $10 million, “eliminated the franchise tax for more than 16,500 Missouri small businesses, or 82 percent of all businesses that owed or paid this tax … .”
Some also claim that franchise taxes comprise “double taxation.” However, as noted above, they are usually applied in combination with or as an alternative to income taxes. Some argue that used singly or in combination with income taxes, franchise fees more fairly represent the complex issues involved in valuing corporations.
Which leaves us where we started. At a time when the legislature and the Governor are enacting massive cuts in services to the taxpayers, they are giving breaks to the wealthiest corporate segments of the state for no discernible reason other than either blind ideology or self-interest. Why are our elected state officials more worried about corporate welfare than fulfilling their obligation to keep the playing ground between powerful interests and ordinary citizens level?