Suppose you had to pay your personal income tax each year and then you had to pay a tax on your assets, too. Well, to some extent you do, don’t you? Except they’re called property taxes.
The legisalture is moving quickly to eliminate similar “double taxation” for businesses. The senate has approved a plan to phase out the corporate franchise (asset) tax during the next five years. Before the final senate vote, only one senator expressed any concerns about the loss of state income of an estimated $17 million a year for the next five years.
Next year’s budget is going to be based on an estimated state income that is $300 million to $700 million less than this fiscal year’s budget, depending on who is speaking at the moment. So $17 million isn’t exactly pocket change.
The Senate sponsor of the franchise tax repeal, Eric Schmitt of Glendale, argues, “Taxes that those companies would normally owe, that they would pay the state treasury, is freed up to hire people and invest.” You can hear the final passage debate on our main webpage, Missourinet.com.
So let’s all watch the state tax collections. If Schmitt is right, companies will invest their $17 million dollars to expand and to hire more workers. Will a combination of corporate income taxes and the income taxes of the workers Schmitt says the business will hire replace that $17 million dollars a year that finance the costs of the government that serves us—factoring out economic growth that would occur otherwise as the nation pulls out of the recession? And how soon can we expect that to happen? Who will keep track of the people that businesses hire specifically because they get to keep their franchise taxes?
Schmitt admits his argument is a philosophical one. Philosophy and reality sometimes mesh. Let’s all keep track and see if it does this time.