When you hear that Oklahoma has a “franchise tax,” you could be forgiven for thinking it is a tax levied on franchises, such as fast-food restaurants. In reality, the franchise tax is actually far worse for economic growth than that. Now that you are dreaming of hamburgers and French fries, let us tell you what the franchise tax actually is.
Franchise Tax = Fee to do Business in Oklahoma
A direct tax on a business' capital ($1.25 for every $1,000 in capital)
Capped at $20,000, regardless of the corporation’s size or net worth.
Imposed on all corporations, whether a profit is made or not.
The franchise tax is a particularly heavy burden on new businesses, who often do not turn a profit in their early years but have to pay the tax anyway. This creates another obstacle young companies must overcome, and for very little pay off for the state—the franchise tax generates less than one half of one percent of the state government’s revenues.
What’s more, the franchise tax has no off-season, making it even more problematic for businesses during downturns in the economy.
Other states are also turning away from the franchise tax.
Oklahoma is one of only 14 states that still levies a franchise tax. Mississippi and Connecticut are both phasing out the tax, taking that number to only 12.
Fortunately, we at The State Chamber Research Foundation aren’t the only ones taking note of the inherent contradiction in our state government trying to recruit businesses to the state while at the same time taxing businesses just to be here. Rep. Gerrid Kendrix, R-Altus, has filed a bill to send the franchise tax packing.
For a primer on Oklahoma’s antiquated franchise tax and why it should be repealed, check out SCRF’s issue brief below.