The Corporate Income Tax . . . Leaving Missouri Behind?
The Cato Institute recently released its “Fiscal Policy Report Card on America’s Governors 2012.” Show-Me Institute Policy Analyst Patrick Ishmael wrote a nice post illustrating how Missouri compares to its neighboring states in the eyes of Cato. However, the Cato report also noted the actions of several state governors and their (sometimes successful) attempts to cut their state’s corporate income tax. Gov. Jan Brewer of Arizona signed a 2.1 point rate cut in Arizona. Gov. Jack Dalrymple of North Dakota signed a 1.25 point rate cut. Governors Paul LePage (Maine) , Rick Scott (Fla.), Terry Branstad (Iowa), and Nikki Haley (S.C.) have all called for either lowering or eliminating their states’ corporate income tax.
Why is this important? These states are all making moves to ensure their state’s economic competitiveness. Missouri already lags behind most of the country in economic growth. It will find itself falling further behind other states if it does not match or exceed the reforms being put forward in other states.
That is why it is important for Missouri to act quickly. Patrick and I have both written about the benefits of Missouri eliminating its corporate income tax and how it could be done in a way that would not negatively affect state revenues via the elimination of economic development tax credits. Missouri should eliminate its corporate income tax because it benefits all businesses, not just those who are politically favored. It also lessens government involvement in planning the economy due to the removal of tax credits.
Missouri does not have the least attractive environment for business . . . yet. However, its current inaction in the face of other states’ increasingly aggressive moves to make their states more competitive, especially Kansas, put Missouri at risk of being a permanent economic wasteland.