January 1, 2020 is the start of a new decade and the beginning of a new corporate tax rate for many Missouri businesses. For all tax years starting on or after the first of the year, corporations will see a reduction in their tax rates from 6.25% to 4.0%.
In 2018, the General Assembly passed Senate Bill 884, sponsored by Senator Andrew Koenig, which contained numerous changes to Missouri tax laws. The reduction in the corporate rate was delayed until 2020, in part to give businesses an opportunity to better plan for the change.
With a reduction in the corporate tax rate to 4.0%, Missouri continues to have one of the most competitive corporate tax climates in the country. Of the states that impose a corporate tax, Missouri will have one of the lowest rates, trailing North Carolina, which has set its corporate rate at 2.50%.
Corporate tax rates vary across the country. Among Missouri’s border states, Iowa has the highest corporate rate, with a top rate of 12%, which is also currently the highest in the country. Illinois and Kansas, bordering Missouri’s two major metro areas also have higher rates. Illinois effectively taxes businesses at 9.5%, while Kansas has a flat rate of 4.0%, with an additional 3.0% surtax on income over $50,000.
The state’s corporate tax rate is of course just one factor affecting a business’s ability to be profitable and successful in Missouri. In the Missouri Chamber’s Missouri 2030 strategic initiative, which included a survey of CEO’s from across the state, consistency in tax policy and administration was viewed as being just as important as tax rates. Other taxes and regulations, access to a trained workforce, and reliable transportation infrastructure all impact businesses every single day.
In the Missouri Chamber’s soon-to-be-released report on the state’s transportation infrastructure, we will highlight steps that can be taken by policymakers to maximize Missouri’s central location as a leading logistics hub.
Missouri’s policymakers have addressed important issues facing businesses over the last several legislative sessions and the state’s new corporate tax rate goes into effect as a new decade is beginning.
The Missouri Chamber established Missouri 2030 to provide a unified vision for the business community to make long-term plans to realize positive change for years to come. We must continue to improve our business climate — building on positive momentum while acknowledging that the competition for jobs, growth, and prosperity is far from over.