In Oklahoma we search to create an surroundings the place companies can attempt to develop free from pointless authorities interference, whereas offering worthwhile items and companies to Oklahomans. Sadly, the state’s franchise tax, additionally known as the Capital Inventory Tax, prevents some companies from rising to their fullest potential, which in flip impedes companies from creating jobs and increasing the state’s workforce.
The state’s franchise tax is a direct tax on a company’s capital, taxing $1.25 for each $1,000 in capital, with the quantity capped at $20,000, whatever the company’s dimension or web value. It’s imposed on all firms, whether or not they make a revenue or not. Merely put, the franchise tax is a price only for doing enterprise in Oklahoma.
Most economists say it takes two to a few years for a brand new enterprise to turn into worthwhile, and in such a aggressive market, the franchise tax stacks the deck even increased in opposition to firms of their infancy. How can we anticipate these companies to endure sluggish early months whereas the state is taking cash from the modest income being earned?
The franchise tax has no low season or consideration of downturns within the financial system, changing into a good heavier burden upon companies throughout troublesome financial occasions.
Oklahoma is one in every of solely 14 states that has a franchise tax. Mississippi and Connecticut are each phasing out their franchise tax. Additionally, a current Legislative Workplace of Fiscal Transparency (LOFT) research beneficial Oklahoma simplify its enterprise tax construction by both transitioning to a single issue apportionment, eliminating the throwback rule or lowering compliance prices associated to figuring out tax legal responsibility. We should take the antiquated, burdensome franchise tax off the books if we need to be aggressive with different states.
Fortunately, Home Invoice 2695, filed by Rep. Gerrid Kendrix, goals to alleviate the compliance burden and monetary impression this tax imposes. Oklahoma will discontinue accumulating the franchise tax starting in 2024, if HB 2695 is permitted by the legislature and signed into regulation by Gov. Kevin Stitt.
If we would like companies to thrive in Oklahoma, why are we taxing them merely for present? Repealing the franchise tax will increase enterprise investments within the financial system and assist create new jobs, whereas lowering tax compliance prices for companies.
It’s a easy repair in our state tax code that can give Oklahoma companies a clearer path to prosperity.
Chad Warmington is the president and CEO of The State Chamber.