False Advertising? Missouri’s Corporate Income Tax Rate Is the 16th-Lowest – Not the 5th-Lowest
There’s a factual error in the advertisement for Missouri that I highlighted recently. The ad says “5th lowest corporate income tax rate,” which is not true. The top corporate income tax rate in Missouri is actually the 16th lowest, not the 5th lowest.
I followed up with the Department of Economic Development (DED) and the Missouri Partnership to learn how they came up with the “5th lowest” figure. They told me that it comes from the “corporate tax index rank” field in the 2011 report on state business tax climate rankings from the Tax Foundation, which I have reproduced below.
The problem is that the ad says “corporate income tax rate” — it does not say “corporate tax index rank, as calculated by Tax Foundation.” These are not the same figure. It’s misleading to say that Missouri has the 5th-lowest corporate income tax rate when it actually has the 16th-lowest.
The “Corporate Tax Index Rank” component is a figure that the Tax Foundation creates. It looks at each state’s corporate tax rate and the way that state’s tax base is structured. By no means does that rank equal the corporate tax rate, which is the figure that affects businesses in Missouri. This is important because, essentially, the DED and Missouri Partnership are merely picking and choosing the figures that will make Missouri look good in an advertisement. They exclude the figures that are more relevant to the businesses and individuals that may consider moving to Missouri — in particular, the corporate tax rate.
Major Components of the State Business Tax Climate Index — Missouri , FY 2011
(Source: Tax Foundation)
|Corporate Tax Index Rank||5|
|Individual Income Tax Index Rank||25|
|Sales Tax Index Rank||15|
|Unemployment Insurance Tax Index Rank||9|
|Property Tax Index Rank||11|
In case any of our readers are interested, I also asked about the cost of this particular advertisement. An executive at the Missouri Partnership informed me that the ad is just one part of the partnership’s comprehensive marketing campaign for 2011, which is funded with a combination of public and private funds.