Mo. lawmakers vote to scrap corporate tax

JEFFERSON CITY, Mo. -- Missouri's tax on business assets would be repealed over five years under legislation given final approval by state lawmakers Wednesday.

The legislation gradually reduces Missouri's franchise tax rate over the next several years before repealing it for the 2016 tax year. It also freezes what businesses are required to pay under the tax so that firms would not pay more than what they paid last year.

The House passed the legislation 105-51 Wednesday, sending it to Gov. Jay Nixon. The Senate passed the bill 28-4 in February.

Supporters of the legislation say repealing the franchise tax could help boost economic development in Missouri. However, critics have questioned how the state would offset the lost revenue. Some argued the education system could be weakened, hampering efforts to attract new businesses through good schools and educated workers.

Legislative staff estimated Missouri could ultimately give up more than $80 million in revenue when the tax is fully repealed.

The state has levied a franchise tax on corporations' assets such as inventory and buildings since 1917 but in recent years has gradually reduced the tax rate and exempted smaller businesses. In 2009, lawmakers exempted firms with less than $10 million in assets from the tax. The eventual repeal of the tax was one of six priorities identified by businesses groups for the current session and is the only to clear the Republican-led legislature so far.

"We've been nibbling, going after this thing for years and making incremental progress," said Dan Mehan, president and CEO of the Missouri Chamber of Commerce and Industry. "But finally, this tax will see its final days. This is the beginning of the end of the franchise tax."

According to the state Chamber of Commerce, Missouri is one of the few states in the Midwest that levies a franchise tax and a corporate income tax. It says Indiana, Minnesota, Ohio and Texas have no capital-based franchise tax and that Iowa and Kentucky only have a franchise tax for banks and investment companies. Kansas is phasing out its franchise tax next year.