Cole County judge to decide fate of earnings-tax ballot initiative

Saturday, September 18, 2010 | 6:54 p.m. CDT

JEFFERSON CITY — The fate of a ballot measure that would curtail the ability of Missouri cities to enact an earnings tax now rests in the hands of a Cole County judge.

Cole County Circuit Court Judge Jon Beetem heard arguments in the case Friday, concerning Proposition A.

The earnings tax exists in only two cities — St. Louis and Kansas City. The cities levy a 1 percent tax on the income of businesses and individuals working or residing in the city.

If passed, Proposition A would require the two cities to hold referendums on the tax every five years, with the first likely next spring. If voters elected to repeal the tax, it would be phased out over a decade.

The measure would also prohibit other cities from enacting their own earnings tax.

The suit was brought in the name of Troy Schulte, Kansas City's city manager, and Pat Dujakovich, president of the Greater Kansas City AFL-CIO

Labor unions have been among the initiative's harshest critics, donating over $200,000 to efforts to defeat the initiative. Schulte and Dujakovich are suing the office of the secretary of state, which has the task of approving initiatives for the ballot.

The plaintiffs, represented by Galen Beaufort, the city attorney for Kansas City, went first.

Beaufort argued the question should be removed from the ballot for two primary reasons. First, he said the initiative violated a Missouri law that insists each initiative can relate to only one issue. Beaufort explained that Proposition A, as written, was actually tackling two questions.

The first question asked voters to determine the fate of existing earnings tax statutes in St. Louis and Kansas City. The second question asked voters to determine whether to prohibit such taxes from being enacted in cities where they did not yet exist.

"These are very different questions depending on which part of Missouri you're in," Beaufort said.

Beaufort's other complaint was that the proposition was unconstitutional. He argued that it sought to change the charter of a city, in this case Kansas City, by a means other than local initiative, a city council vote or a local charter commission. Such an action would be illegal.

Matt Dameron, representing the secretary of state's office, went next. He responded that Beaufort was asking the court to adopt a new, stricter standard than called for by the law when determining how many questions an initiative dealt with. He assured the judge that the proposition fell well within the definition of a single-issue question.

On the issue of whether the proposition illegally asked statewide voters to alter the city charter of Kansas City, Dameron said the initiative wouldn't change any city's charter, only the state statutes that granted certain cities the authority to enact earnings taxes in the first place.

Marc Ellinger, a lawyer for Let Voters Decide — a group supporting Proposition A — echoed that reasoning.

"What the state giveth, the state can alter or even take away," Ellinger said.

Scott Charton, a spokesman for Let Voters Decide, said that aside from the legal issues, the debate was about giving citizens a choice.

"We're giving voters the chance to decide in November," Charton said. "They don't want to give the people a chance to decide."

The push to get Proposition A on the ballot is bankrolled by multimillionaire businessman and Westphalia resident Rex Sinquefield, who has given nearly $7 million to the initiative.

Sinquefield has refused requests for interviews about Proposition A or his personal financing of the effort to get the measure on the ballot.

On the other side is a coalition of the St. Louis and Kansas City governments, labor unions and the Missouri Municipal League.

"It's a fear-mongering campaign," said Richard Sheets, the organization's deputy executive director.

Sheets said supporters of Proposition A have exaggerated the possibility that other municipalities could adopt the earnings tax, turning a local concern into a state issue.

"Why should the voters of the entire state be asked to vote on what is only a concern to a few people?" Sheets said, referring to the measure's direct affect on St. Louis and Kansas City.

Kansas City takes in almost $200 million a year from the tax. St. Louis estimates $140.7 million — 31 percent of the city's general fund revenues in the 2010 fiscal year. Beaufort said the fear of losing that money weighs heavily on the citizens of Kansas City.

The hearing, which lasted about an hour, will not end the legal process. Beaufort indicated that he would consider appealing an unfavorable ruling from the judge.

Even if that potential appeal is rejected and the law is approved by voters on Nov. 2, more legal challenges are expected before the spring referendums can go ahead.

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