In his Oct. 15 column, George Kennedy claims that Proposition A aims “to destroy the finances of the state’s two biggest cities.” I respectfully disagree. Proposition A aims, in part, to give citizens in Kansas City and St. Louis the right to vote on whether they want to retain their 1 percent earnings tax or phase it out gradually over 10 years.
Many other local taxes have sunset provisions, requiring voter approval to be renewed. But it has been decades since politicians in Kansas City and St. Louis allowed voters in their cities to consider the earnings tax. Proposition A seeks only to give citizens that opportunity. Those who oppose Prop A believe the earnings tax should live on forever without voter scrutiny and approval.
Unfortunately, Mr. Kennedy and other opponents of Prop A – which include municipal employee unions, local government bureaucrats and local politicians – seem to have little trust in the voters.
There is good reason to be concerned about the earnings tax. There is growing recognition that a local earnings tax – which is imposed on personal incomes and business profits – on top of state and federal income taxes is unfair to working people and hurts local economies. It pushes businesses to locate in cities or towns that do not have a local earnings tax.
Removing the e-tax would help attract new businesses and residents to St. Louis and Kansas City. To get those cities growing again would boost their local economies. That would generate more local property and sales taxes while reducing the tax burden on local working families and business owners.
Many people ask what would be done to replace the earnings tax revenue in St. Louis and Kansas City. First, I want to reiterate, Prop A does NOT repeal any tax. Second, the 10-year phase-out provision means revenue from the earnings tax would decline slowly, incrementally, allowing local leaders plenty of time to find alternatives.
Missourian readers also might be interested in knowing that the earnings tax is not common. Only 25 of the largest 150 cities in the country have a local income tax.
Most of the attention for Proposition A has centered around its impact on St. Louis and Kansas City. In fact, there is an equally important component of Prop A that the Let Voters Decide campaign thinks is crucial from Columbia to Cape Girardeau and St. Joseph to Hannibal.
If Prop A passes next month, state and local politicians will be prohibited from imposing an earnings tax anywhere outside Kansas City and St. Louis. This is no idle concern. Local earnings taxes have been considered through the years in St. Joseph, Jefferson City and other Missouri communities. And nothing in state law prohibits creation of new local earnings taxes.
As long as the earnings tax remains an option for any municipality, this third layer of income tax remains a tempting and potentially destructive threat for Missouri municipal taxpayers. And make no mistake about it – cities want the option of imposing the earnings tax. The Missouri Municipal League, the organization of top city officials from across the state, dislikes Prop A. But there’s little wonder that self-interested bureaucrats and public employee unions would want to protect a taxation option.
There’s a pretty basic reason for having all voters in the state handle this issue. Earnings taxes are authorized under state statute. Therefore, a change in state law is the only way to make sure a local earnings tax doesn’t gain traction in your community.
Marc Ellinger is a Jefferson City attorney and spokesman for the Let Voters Decide Initiative. For more information on the initiative, go to letvotersdecide.com.