Last week, the presidential debate took its place among notable sparring contests, perhaps rivaled in anticipation only by Ali-Frazier I. Despite the sharp exchange of verbal blows, both men seemed to agree on one thing, the need to lower the corporate income tax. It was great to hear both candidates recognize that our federal corporate income tax rate of 35 percent is too high.
The Show-Me Institute has discussed the merits of eliminating the Missouri corporate income tax. A lower or non-existent corporate tax rate will leave corporations with more of their money to invest in new projects or to hire new employees. Lower corporate taxes would allow taxing jurisdictions to be more competitive compared to neighboring jurisdictions with higher tax rates. Lowering the corporate tax rate would also be fairer than special incentives and tax credits because it would apply equally to all corporations instead of certain companies that politicians favor.
Both Gov. Mitt Romney and President Barack Obama stated in the debate that they would like to “pay for” a corporate income tax cut by closing loopholes and exemptions. In an upcoming paper for the Show-Me Institute, my colleague Patrick Ishmael and I propose eliminating Missouri’s corporate income tax. In order to ensure that Missouri’s revenues are not negatively impacted, Patrick and I propose that Missouri phase out the issuance of economic development tax credits, which have their own set of problems.
It appears that lowering the federal corporate tax rate has now become a bipartisan idea. Hopefully, it can be a bipartisan idea here as well. If Missouri wants to avoid going down for the count, it should move forward with corporate tax reform.
