Missouri House advances bill to cut its corporate tax in half
North Carolina made state tax history in 2021 by passing a law to eliminate the state’s corporate income tax by the end of 2026. Although the Tarheel State will be the first to repeal its corporate income tax, it probably won’t be the last. In fact, Missouri is advancing a bill to slash its corporate rate from 4% to 2%, put the Show Me State on a pathway that could lead to full corporate income tax repeal.
Missouri’s low 4% corporate tax combined with a competitive corporate tax structure gives Missouri the third-most competitive corporate tax in Tax Foundation’s 2023 State Business Tax Climate Index. Missouri Speaker Dean Plocher made corporate tax cuts a top priority for Missouri this session, and delivered a bill to cut the corporate rate in half to the state’s senate.
Missouri’s House passed HB 816 on a 111-48 vote. The bill would cut the Show-Me State’s corporate rate from 4% to 2%, effective January 1, 2024. It would also exempt social security benefits from taxation, accelerate individual income tax rate cuts to 4.5% with immediate effect, and schedule further income tax rate reductions to 4.05% in future years.
The only two states with more competitive corporate tax codes than Missouri are South Dakota and Wyoming, which both forego corporate taxation altogether. This leaves Nebraska in the most competitive region in the country. Colorado (4.4%) and Oklahoma (4.0%) each levy a low, flat corporate tax. Iowa’s corporate income tax is being phased down to 5.5%. And even Kansas’ House passed a bill to cut its corporate rate by a point, from 7% to 6%.
Nebraska’s 7.25% corporate tax rate is high for the region, and it will stick out like a sore thumb if Nebraska’s neighbors cut their rates while Nebraska stands still. Fortunately, Nebraska’s state legislature is advancing LB 754, which would lower the Cornhusker State’s corporate rate to 3.99% over several years, putting Nebraska in line with surrounding states.
The timing couldn’t be better for Nebraska to enact corporate tax reform. With corporate rate cuts advancing in Kansas and Missouri, Nebraska’s highly competitive region is likely to get even more competitive this year.