The question of earnings taxes
The question of municipal earnings taxes have been raised once again last week:
“A series of proposed ballot initiatives unveiled by the Missouri secretary of state this week could spell the end of the city’s much-maligned 1 percent earnings tax.The ballot questions – five of them – were approved only for circulation, meaning that supporters are free to begin the process of gathering the 100,000 or so signatures needed to put any one of them on the statewide ballot.
The initiatives were officially submitted to the secretary of state by a Jefferson City attorney, but the push itself is being led by – who else? – wealthy financier Rex Sinquefield, who has flooded the coffers of Missouri politicians with campaign cash.” Source: P-D Political Fix)
The following is the news release from Missouri Secretary of State Robin Carnahan (link):
The first ballot title for the petition relating to earnings taxes reads:
Shall Missouri law be amended to:
- repeal the authority of certain cities to use earnings taxes to fund their budgets;
- require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 5 years thereafter;
- require any current earnings tax that is not approved by the voters to be phased out over a period of 5 years; and
- prohibit any city from adding a new earnings tax to fund their budget?
The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.The second ballot title for the petition relating to earnings taxes reads:
Shall Missouri law be amended to:
- repeal the authority of certain cities to use earnings taxes to fund their budgets;
- require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 5 years thereafter;
- require any current earnings tax that is not approved by the voters to be phased out over a period of 10 years; and
- prohibit any city from adding a new earnings tax to fund their budget?
The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.The third ballot title for the petition relating to earnings taxes reads:
Shall Missouri law be amended to:
- repeal the authority of certain cities to use earnings taxes to fund their budgets;
- require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 10 years thereafter;
- require any current earnings tax that is not approved by the voters to be phased out over a period of 10 years; and
- prohibit any city from adding a new earnings tax to fund their budget?
The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.The fourth ballot title for the petition relating to earnings taxes reads:
Shall Missouri law be amended to:
- repeal the authority of certain cities to use earnings taxes to fund their budgets;
- require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 5 years thereafter;
- require any current earnings tax that is not approved by the voters to be phased out over a period of 10 years; and
- prohibit any city from adding a new earnings tax to fund their budget?
The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.The fifth ballot title for the petition relating to earnings taxes reads:
Shall Missouri law be amended to eliminate the ability of cities to use earnings taxes to fund their budgets by phasing out any existing earnings tax over a ten year period and prohibiting any city from adding such a tax as a potential source of revenue?The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.These five petitions relating to earnings taxes, which would amend Chapter 92 of the Missouri Revised Statutes, were submitted by Mr. Marc H. Ellinger, 308 East High Street, Ste. 301, Jefferson City, MO 65101-3237.
That is a lot to absorb. Each of the five relates to how “certain cities use earnings taxes to fund their budgets.”
If wealthy financier/political activist Rex Sinquefield (right) gets his way and eliminates the city of St. Louis’ earnings tax, city officials say the impact would be “both disastrously serious and disastrously negative,” according to documents filed with the state auditor’s office.
In fact, city officials say that if St. Louis loses the $141 million collected annually from the one-percent tax, which provides close to 40 percent of the city’s income, “it could no longer function as a viable city government.”
Loss of the earnings tax, without replacing it with a roughly equal source of revenue, “would result in cuts to public safety services so deep as to end the City’s viability as a place to live, work and visit,” officials say. (Source: St. Louis Beacon)
Tax policies can be an important growth factor for municipalities, regions and states. The wrong policies and growth can be above average. Have the wrong policy and growth can lag behind the national average. The latter is the argument put forth by Sinquefield’s Show-Me Institute:
Missouri’s economic development and growth rates are chronically below average. During the past 10 years, employment has grown 8.8 percent nationally, while Missouri has boosted jobs by only 6 percent. Economists have provided one explanation for the state’s lagging performance: Missouri’s personal income tax rates. (Source)
My gut tells me the city & state would eventually be better off if we eliminated the earnings tax. That increased population and taxable activity would make up for the loss. The trick is how to get to that point. I’m all for trying to figure out how to increase our population, our employment base and other factors. We can’t just say the earnings tax is etched in stone.
So take the poll in the upper right corner and add your thoughts below.
– Steve Patterson
As soon as Sinquefield and others advocating repeal of the earnings tax can point to alternative funding sources to maintain city services, let's listen to his ideas. Until then, he's only promoting half a strategy. If he wants to eliminate the earnings tax, then it's his responsibility to show how to make the plan financially feasible for the city and its 400,000 residents. Our dumpsters are already overflowing since the cit 1X per week
Missouri's personal income taxes aren't dropping as a result of the earnings tax. Already some of the biggest employers in town (BJC for one) pay the earnings tax for their employees, so I'm not certain that we'd see an influx in population due to that 1%.
Like anon says, it's only half the balance sheet. Where does that 40% of the city's revenues come from if they repeal the earnings tax? Property taxes, sales taxes, or fees, all of which are far more regressive?
I agree, with you the earnings tax is bad, but is least (IMO) of evils in City taxes, the poor people pay far more of their income in the other taxes.
St. Louis and Kansas City would be back in the same boat as everybody else. They would have to put forth a budget based on sales and property tax. Secondly, its not his responsibility to make a plan financial feasible for the city as its not his responsibility to balance any other local budget. I do think the proposed legislation doesn't go far enough in terms of state wide income tax (also an earnings tax). The state should go the route of no earnings tax period.
Of course, then the state would need to hand back to Kansas City and St Louis the authority to set their own property taxes. Since St Louis is an independent city and not part of a county, only the state can set their property tax rate.
It does seem a little unfair that folks who live in the City but work in the suburban areas still also have to pay the 1%. I understand the concept of taxing non-residents, and I don't have a problem with it. But if you spend most of your waking hours either at work or riding public transportation to suburban jobs, what are you getting for your money?
You get the same services every other city resident gets. Police, fire, trash removal, parks, etc. In reply to Tpekren, why shouldn't Sinquefield be expected to explain the financial impacts of his proposal? All he is proposing is to cut 40% of the city's revenues. How is the city supposed to operate? It is a ridiculous proposal without a plan for financial solvency.
The theory is you change the tax structure and you change economic activity. Increased activity translates to higher revenue. I'm not saying it would balance out. I know the reverse is true, increase taxes enough and people will leave a locale. I think it is important to discuss our tax policies rather than assume what we have currently is what we will always have.
“The theory is…” Who's theory? Sinquefield's? Sarah Palin's? The FACT IS the city cannot maintain its current level of basic services. And conservatives are proposing reducing the city's revenues. Great idea.
Ya gotta love JZ's idea of selling off city parkland. Can we get a show of hands in support of that idea. JZ, you live in SW City. How about we start off by selling Francis Park or Tilles Park? Lindenwood maybe?
No? You want to sell the parks in the poorer parts of town? Another “conservative” approach perhaps? Conserving what for whom, that's the question.
Taxes are inherently unfair, since, at their core, they're reallocating wealth. The earnings tax is unfair to nonresidents, the sales tax is unfair to poor people and the property tax is unfair to long-term, primarily older, property owners. In contrast, the “best” taxes are the ones “I” don't have to pay!
Should the earnings tax be outlawed, St. Louis would likely be forced to a) cut services, b) raise its other “legal” taxes and c) create new fees, like charging for trash collection. Alternately, it could choose to do only one or two of these things. While it's easy to focus on only one component, like the earnings tax, ultimately the only number that really matters is the aggregate total you have to pay – in reality, on a personal level, any increase is inherently “unfair”, while any decrease is “well deserved”.
As I've said on previous postings, the biggest reason to eliminate the earnings tax is the negative perception it carries, especially among employers, in the region we live in. It very simply places the city at a competetive disadvantage when businesses are looking at where to locate or to relocate. All things being relatively equal (and they are never truly equal), not having to pay 1% or 2% IS a big issue, especially if all you have to do is move a mile or two away. It was different when the earnings tax was first implemented, and more than 90% of the employment base was in the city. Now that it's much less than 50%, and continuing to drop, not so much.
Just one example – Schlafly Brweing started in the city (and the Tap Room is still in the city), but when they needed to expand production, they chose Maplewood. Were there other considerations than the earnings tax as well as other incentives? Absolutely. But to say that the earnings tax was (and is) a non-issue is naive. As we continue to move away from our traditional manufacturing base, into services and retail, we have become much more mobile. We CAN move to a better location, and we often do. We're not tied to a river or a rail siding. We don't have multi-ton pieces of machinery to move, we have PC's. We're not tied to public transit, we drive. And if we can save a few bucks, we will. Which is precisely why I expect any ballot proposal to pass – the lure of “sticking it to the government” will outweigh any gloom and doom predictions/promises about reductions in services (see Metro for a parallel situation) the city and its unions will put forward . . .
Steve, your architectural urbanism is suddenly and utterly counterbalanced by your disastrously anti-city tax perspective.
Your “gut tells you”? What happened to Steve Patterson the tireless researcher? When you are talking about starving the city of desperately needed income you should have more to go on.
Can you please give some evidence that backs up that gut of yours? Any evidence that the earnings tax is more harmful than helpful? Anything beyond this voodoo tax theory propagated by discredited conservative economists and politicians?
Comparative statistics? Contextual data? Where is the evidence of correlation between the tax and unemployment rates? Economic growth rates?
http://www.bls.gov/web/laummtrk.htm
http://data.bls.gov/PDQ/servlet/SurveyOutputSer…
According to those links, Saint Louis hovers around, just below the U.S. average for unemployment. Kansas City is a full 2 points below! Where is the evidence of the devastation caused by the 1% tax?
Saint Louis is doing better than some of the biggest, wealthiest, most famous cities in the United States: Chicago, Charleston, Atlanta, San Diego, San Francisco, Reno, Portland, Miami, Los Angeles, Las Vegas.
Why? If you listened to these anti-tax creeps you'd think Saint Louis was some sort of tax-you-to-death hellhole that everyone is desperately fleeing from. Despite the fact that our population decline has essentially halted..and we may be getting an increase soon.
Our city has weathered the economic storm better than average, we lost less of our GDP than the nation as a whole did.
Please do some more research before you toss my city to the rapid anti-tax wolves, would you? This is all such rhetorical nonsense, I expect better from you, Steve, I sincerely do.
The causes of a city's economic fortunes or disasters are many, complex, and nuanced. Jumping onto these “TAXES ARE THE DEVIL!”, “TOO MANY WARDS ARE THE DEVIL!”, crazy-wagons is doing nothing to get us to a point where we can actually improve our city's economic situation.
I've not jumped onto any wagon. I'm open to discussing our policies to see if decisions made decades ago fit today. In studying demographics I do see the St. Louis region is a “no growth” region. We need to examine all our policies – taxes, education, zoning, ward, etc. Are we the best we can be? I don't think we are.
The city provides more public services than our neighboring municipalities because it HAS TO. We have more parks to maintain. We have more entertainment districts to protect and serve. We have more people in poverty requiring public services. The city serves the region in a much larger capacity than most of the other smaller municipalities in our region. Yet, most residents of the region do not pay any city taxes. If you propose elimination of the earnings tax, either propose an alternative source of revenue or you're wasting everyone's time (and forget about revenue sharing with St. Louis County – that's a nonstarter – just ask any Chesterfield resident).
“The city provides more public services . . . because it HAS TO.” Says who? We can, and probably will have to, decide to provide a significantly lower level of services.
“We have more parks to maintain.” We have less than half the population we had fifty years ago – let's sell some off.
“We have more entertainment districts to protect and serve.” Sounds like an opportunity to raise the fees on liquor licenses and to impose a 10% surcharge on all ticket sales and cover charges.
“We have more people in poverty requiring public services.” Do we have more simply because the services are available and concentrated here? Then, let's work to disperse them throughout the region – there are plenty of vacant retail structures in the 'burbs that can be converted to shelters and sites for populations with “special needs”. Chicken or egg – there's no reason why only St. Louis has to be home to the NLEC, the Salvation Army and Goodwill!
“The city serves the region in a much larger capacity than most of the other smaller municipalities in our region.” Agreed. But why? Partly out of choice, partly out of inertia, and partly because few people or organizations want to “work themselves out of a job”. I'll repeat, we've lost more than half of our population and a good chunk of our employment base over the past fifty years. It may be simply no longer financially possible, as a city, to provide the same level of services as we did in 1960 or 1980.
“Yet, most residents of the region do not pay any city taxes.” Wrong. If you purchase a beer at a ballgame or eat at restaurant in the city, you pay sales taxes, much like how St. Louis residents are paying sales taxes to Maplewood every time they shop at WalMart.
If you propose elimination of the earnings tax, . . . propose an alternative source of revenue . . . ” One, increase property taxes, with business operations paying a higher rate. Two, charge residents for trash services. Three, eliminate every other street light. Four, increase permit fees, for everything from building permits to liquor licenses to motor vehicle licenses. Five, impose a tax on every entertainment ticket sold or cover charge imposed in the city. Six, increase both the rates charged for parking meters and the fines charged for violations, plus be more aggressive in the enforcement of existing parking restrictions. Seven, add photo radar cameras to all St. Louis interstate highways. Eight, consider privatizing the delivery of those city services that can be delivered more cost-effectively by the private sector. Nine, make the adjacent property owners responsible for the maintenance of trees on the city's right of way. Ten, bring back the “chain gangs” – if jail inmates can safely work “outside the walls”, put them to work maintaining our parks and picking up trash. Eleven, impose a local tax on all tobacco products. Twelve, decriminalize the possession and use of small amounts of “medical” marijuana AND tax its sale. Thirteen, increase water rates. Fourteen, impose an annual fee on every non-residential, private parking space in the city. And fifteen, impose a transfer tax on real estate transactions.
Bottom line, we're looking at a potential “problem” of $200 million annually, for a population of 350,000, or approximately $570 per person. The list above should go a long way in “solving” the problem – $35/month for trash = $420. One speeding ticket = $100. Three parking tickets at $40 = $120. Taxes on alcohol and entertainment = $250. The list can go on and on and on. But, when you factor in that you'll no longer be paying 1% of your salary every year, and that many of these fees are optional/directly related to the services provided, then these other hassles of urban living start to be more bearable and/or acceptable.
JZ, lots of good ideas. Why not implement some of them and see how they work out? Then maybe phase out the earnings tax. However, with a majority low income population, there are many regressive issues concerning cost sharing in your proposals. Reducing services to low income people sounds like a supply side solution to poverty. Doubtful prospects for success I fear.
By definition, the poor will always be net consumers of government services, while the poor and businesses will be net donors. You're right, reducing services is on the supply side of the equation, and, technically, completely independent of the revenue side, including whether or not to impose an earnings tax. The earnings tax is attractive to politicians since it casts a wider net than, for example, a property tax, but it's still just another revenue source. If it goes away, either others will be found/created OR services will need to be reduced, and that's precisely the discussion that both the consumers of services and government leaders DON'T want to have. With major structural changes facing city finances, everything will need to be “on the table”, and every program will need to justify its benefits, or even its existence, aka zero-based budgeting. This would be completely different from the current system, where pretty much every line item in the budget is assumed to serve an existing need, and the only question is how much to increase it or decrease it from previous years.
That's why I purposely avoided proposing cuts in social services. I'm also very aware that some of the “new” charges I proposed (trash collection fees, tobacco tax, etc.) will inevitably cost poor people more than the present system, but they're, by no means, the final answer. Trash fees could be indexed to family income, subsidized in poor neighborhoods and/or just based on the amount of trash generated. A tobacco tax could encourage smokers to quit, saving them cash and reducing health expenses and street sweeping costs for the city. Remember, this politics, and every side is going to have its advocates. And, for better or worse, any discussion will tend to upset the status quo . . .
JZ, it doesn't sound like you fully grasp the scale of the low income population of the city of St. Louis. By most definitions, St. Louis city is 3/4 low income. Frankly, one good thing about the earnings tax is that it creates a way for the city to capture some tax revenue from non-residents who work in the city. Left to its own devices, the city is a low income island in the region with a low tax base. The title of this post should probably have been, “Finding alternatives to the earnings tax”. That is the challege. No one likes taxes, but government does need money to operate. The police force is undermanned. Garbage collection has been scaled back. City workers are taking unpaid furlough. The horse is being beaten to death. And now we are talking about cutting off its oxygen?
Agreed except I'm talking about switching to a different form of oxygen.
I do “grasp” the challenges the city faces. Where we apparently differ is on how to best solve the problem. Yes, “St. Louis city is 3/4 low income.” And yes, currently, the earnings tax “creates a way for the city to capture some tax revenue from non-residents who work in the city.” But that only works for as long as well-paid workers and viable businesses choose to remain in the city. If good businesses and better-paid people choose to move elsewhere in the region, for whatever reason (crime, schools, taxes), the city will continue to get poorer and less able to deliver the services that many of its citizens believe are “needed” – look no further than East St. Louis. Yes, “government does need money to operate”, but it also needs to focus on attracting good jobs and the non-poor. Being the “low income island in the region with a low tax base” is simply not sustainable. Fortunately, for the city, the inner ring suburbs are starting to “pick up some of the slack” and feeling some of the pain that poverty and decay generate. It'll be interesting to see how they adjust to the shifting demographic trends.
1, 5, 7, 9, 10, 11, 12, 13, and 15 would all be disallowed by current state law.
3 would be a very bad idea, given the direct correlation between lighting and crime (St Louis' crime reputation is already bad enough).
2, 4, and 6/14 are not only feasible, but likely; though it would be questionable if they could replace the earnings tax in revenue. 8 is possible, but the return on questionable.
If the state can change the law on the earnings tax, they can also, potentially, change the laws on some or all of the revenue sources that are currently “disallowed”. And, to clarify, selling park land would be a real stretch – we already own plenty of formerly-private parcels that should be sold off first. The challenge remains, as always, timing. Do we sell now, at a significant discount, and hope that the “deals” help kick start redevelopment? Or do we just wait for the economy to improve and get a bigger return our “investments”?
“no growth”? In so far as nearly every urban area in the United States experienced a demographic collapse…and still are having a hard time regaining their populations. There is no obvious correlation between that specific tax and our growth problems.
The arguments against the tax are the arguments I hear about every tax, which makes proposing other taxes completely disingenuous. The ideological proponents of this tax, like the Gateway group, are hoping to collapse the city's budget….they don't want new taxes…..or the taxes they propose are almost wholly attacks on the poor.
Relying on sales taxes have crushed alot of city and state governments during because of the decrease in purchases made during the recession.
Relying on property taxes is ludicrous, property values in Saint Louis are extraordinarily low. And, if you want to see an increase in development, it's unlikely that a higher property tax will help with that.
On another note, we may still be demographically treading water, which is better than before, but Saint Louis is economically developing. Our city is getting ready to grow, and being a part of that growth I know the real problems and promises this city has.
Taxes are not the problem here, the City of Saint Louis has a pretty lenient tax system for a major city. Compare it to any successful city, you'd see that most have much, much higher taxes….and fewer benefits. (Most high-tax cities do not have 100% free zoos and museums).
This is a sneak-attack by Libertarians and the Conservatives infesting rural and suburban Missouri on our two amazing urban areas: Saint Louis and Kansas City. They have no right to destroy our city governments, they have no right to impose their anti-tax, anti-poor, anti-community ideology on us.
Questions:
1. Aren't there other cities around the country that have earnings taxes? Doesn't New York City have an earnings tax?
2. Why should people all over Missouri vote on this issue? Why shouldn't this be an issue for only residents of STL and KC?
3. Why should I invest in St. Louis if it's likely there will be a cut in city services? Why would I want to invest in a city where there will have to be a cut in police protection?
Yes, other cities have earnings taxes. Out of hundreds of municipalities in the St. Louis region, only St. Louis has an earnings tax. To change a state law you need either the state legislature to pass a bill making the change or a majority of the citizens need to vote in favor of the change. Eliminating the earnings tax without examining the annual budget and revenue sources would be reckless. I believe we need to seriously analyze rather than just stick to 50 year old decisions.
People have made this analysis time and again and the results are always the same: unless some alternative revenue source is provided, the city becomes immediately insolvent without the earnings tax. Sinquefield, what do you propose to replace the earnings tax?
There are many potential replacements for the earnings tax, but many would require the approval of the legislature. For one, with the technology that is now available, internet sales could be taxed. The state currently asks you to voluntarily pay taxes on internet sales over a certain amount, but there is really no enforcement. Consumer services are another un-tapped revenue source. Furthermore, we could tax college sporting event tickets which are now exempt. Raising fees for services such as building permits, etc is another way to generate income.
I am not a fan of the earnings tax. But I do feel that other taxes would need to be in place before the earnings tax is rescinded. The examples I listed above are only the tip of the iceberg when it comes to creating new revenue streams.
UrbanReviewSTL said “To change a state law you need either the state legislature to pass a bill making the change or a majority of the citizens need to vote in favor of the change.”
Maybe I don't understand the issue. My question #2 above is why we need to change the state law. Why can't the residents of STL city vote on repealing, or not repealing, the earnings tax? Can STL repeal the tax without the state?
I understand and agree we shouldn't keep doing things the way we've done them for 50 years just because it's the way we've always done it, but sometimes you examine something you've done for 50 years and decide it's still worthwhile.
True, the city could change our own tax rate. But city leaders have no incentive to examine such complex issues. Besides they are busy responding to constituent requests to fill potholes and add stop sign. A big stick from the state is needed to force a look at expenses and all possible revenue models.
City leaders are examining complex finance issues every day. Look at the cover of today's Post Dispatch. With dwindling revenues, city leaders are considering reneging on a years' old commitment to fund a training program in north city because of tight finances. At year end, city workers were enduring furloughs of up to two weeks.
What???? Are you literally implying that Saint Louis needs to be taught a lesson by the far more effective, mature, and intelligent Missouri State Government?
Your evidence is that the city is dealing with real issues and not tax-hype phantasms?
Why this is a statewide issue? Because of the potential for other cities wanting to impose their own earnings taxes. With the existing situation, I doubt that there are very many families paying an earnings tax to both St. Louis and Kansas City. But what if Clayton or Maryland Heights figured out that an earnings tax would be a great solution to their budget needs? Families could easily end up paying two cities (where they work) and living in a third. It all boils down to the fundamental concept of no taxation without representation. Whether its a sales tax, an earnings tax, a special district fee or a tax on hotel rooms or rental cars, the trend recently has been to separate the funding and delivery of services from the people making the decisions – just find a way to stick it to someone who won't have a vote. And, around St. Louis, it's particularily complex since we have so many governmental units (200+) that have the ability to make these kinds of decisions. And like I said before, it all depends on whether you're on the “donating” end or the receiving end of the equation . . .
No taxation without representation! It's as simple as that! God knows these commuters don't use the public roads our city funds! They don't use any of the resources our city provides on a regular basis! We might as well be holding them at gun point! How horrible we should all feel!
I love how every issue is so simple, so easily fitted into people's narrow ideologies. It makes solving problems so quick, easy, efficient, and effective!
Taxation without representation has nothing to do with getting to use infrastructure or services. It has all to do with having a say and expecting accountability for how my tax dollars are spent. As a St. Louis resident, I elect a mayor, an alderman and the school board who decide how how to spend my property and sales taxes – in theory, I have a voice. As a St. Louis resident, I have no say in how my sales tax dollars are spent in Brentwood, Maplewood, Kirkwood or Clayton (or Orlando or Chicago or Nashville). Nonresidents resent being double taxed if they work in the city and live outside, even if they do receive some “benefits”. The reality is they have to pay to fund services in St Louis through earnings and sales taxes, plus pay to fund parallel services wherever they live, through property and sales taxes there. You may view this as a “a sneak-attack by Libertarians and the Conservatives infesting rural and suburban Missouri”. In many ways I agree, but the bottom line is that perception is reality, and for more and more non-poor, over-contributing members of society, St. Louis is no longer a good answer . . .
This is my point: Your creed “taxation without representation” is not applicable in this situation. It sounds nice, very patriotic, but we are not talking about something where that creed can be applied sensibly.
You do realize that people from Saint Charles have to abide by the laws that Saint Louis makes, right? You do realize that they have to still pay a sales tax, right? Are you telling me we should stop all taxes that non-Saint Louis citizens have to pay? All laws that non-Saint Louis citizens have to follow? They are not being represented, after all! Nonsense, utter, bone-headed, simplistic nonsense.
Secondly, you are using some interesting semantic twists here:
“If a one member of a family works in Clayton, but another in Saint Louis, they will get taxed double.”
That's not true, they are getting taxed once each…they may be under one “family” unit, but it is NOT a case of double-taxation. They are being taxed separately.
There is absolutely no evidence that earnings taxes are responsible for central city decline. Look for commentary wherever I can get it printed soon.
I don't think the earnings tax caused our decline but I do think it may be a roadblock to rebirth.
With no evidence to back up that opinion, I might add.
We are arguing about that fact that we have to have the earnings tax to survive and this is missing the whole point. We do need to keep the revenue stream up because the city has to provive all the sevices that it currently does, but why do we in St. Louis fear change so much. Every time progress pops its head everybody is against that also. Getting rid of the tax will make St. louis more COMPETATIVE in drawing new employers to the city not just the region. We have to look at this in a competative way we need to be more attractive to corporations to relocate hear and we can do that by having lower taxes that other cities and we have great people here already to fill these new jobs. We should not want to be the same as other cities in the US we should want to be better and we can be. I think that more business in St. louis would mean more revenue. This will not happen over night that is why the ten year phase out might be the way to go and it would give us time to figure out how to replace the rest of the lost revenue. This is a chance for St. Louis to become a great city that the country looks to again. The last time was 1904!
Being competitive involves far more than a lower tax burden. In fact, if low taxes were the key to being competitive, Missouri should be one of the most prosperous states in the nation, since it has one of the very lowest tax burdens of any state. If we want to grow, the fundamental building blocks are public education, public safety and infrastructure. These factors are the basis for building the kind of quality of life that attracts businesses and people. In the end, it's not how much we pay in taxes that makes the difference, but what we get for what we pay. Living in a place with very low taxes, but one that's uninteresting, unsafe and unattractive, would not be very pleasant. We need to look at the whole picture…why this obsession with one tax in one city?
First, the “fact” that always gets thrown around that the city earnings tax is 40% of the city income is completly misleading. In May of 2008 I dug through the actual city financial statements and pulled the numbers showing it's not even 20% of their total revenue as reported (http://www.metropolitanrural.com/?p=163).
Phasing out the taxes over a period of time is the right thing to do. Tax abated properties are slated to start ending in the near future causing an increase in property tax revenue as well, don't forget.
Yes, we will also still have some large liabilities due for pension funds thanks to the lack of planning or arrogance of past boards deciding that contributing to the pension fund wasn't necessary when the market was going up. Now we have to not only make the required annual contributions, but cover the losses as well. It's a whole other issue that needs to be dealt with, but not an excuse for continuing to use the earnings tax crutch.
Rex sinqufield is a rich conservative who ofte puts forth shallow ideas which benefit the rich. His solution for reeplacing the earnings tax is to increase property tax,a re-gressive idea since much high income property is tax abated while low-income property is not. The alternative ideas in these comments have no specific numbers attached to them
Steve – I have an idea for one of your upcoming polls. Since people seem so interested in divesting St. Louis of its tax base, why not go the next logical step? What do you think your readers would think of the idea of having voters of the state of Missouri dissolve St. Louis of its corporate status, transerferring all of its governmental affairs to state control? If the voters of the state are so savvy about how to best manage the City of St. Louis, why don't we just turn the whole thing over to them? If people think this is a far fetched scenario, it is no less reasonable than Sinquefield's plan to have state voters eliminate the city's earning tax.
In fact, the earnings tax is one of the most fair forms of local taxation…compare it to the property tax, sales tax, and utility gross receipts tax, the other leading sources of local revenue. Like most big cities, St. Louis is host to major sporting and other regional cultural events, it is the region's largest employment center, and it hosts the region's downtown. Without the earnings tax, many of those who use and benefit from the City would pay very little for the infrastructure and public safety needs that they generate. Suggesting that doing away with the earnings tax would increase economic activity to the point where the income would be replaced is a kind of supply side economics that really doesn't work. In fact, a better idea would be to impose a regional earnings tax and roll back property and sales taxes. That would reduce regressive taxation, eliminate the small tax disincentive to living and working in the City, while creating an incentive for local governments to attract good, high paying jobs, instead of the retail jobs that contribute very little to the region's economy but fill local tax coffers. Mr. Sinquefield suggests that the earnings tax should be replaced by a local land value tax, essentially a tax on property and not the improvements (structures…). While this has a theoretical benefit, the practical result would be to shift the entire tax burden to city residents and eliminate the contribution from those who work or do business in the city. This would have exactly the opposite economic effect of the supposed benefit of eliminating the earnings tax. It would be so prohibitive to own property in the city that it would reverse the nascent rebirth that is occurring.
In short, public services come at a cost. The real question is how to share that cost most equitably. Nobody likes taxes, but the earnings tax is far better than the alternatives. Eliminating the tax in the manner proposed would be an unmitigated disaster for the City and for the region. Mr. Sinquefield and others can live in the theoretical supply-side economic fantasy from their outposts in the suburbs, but the City is not some kind of experiment. Some of us actually live and work here.
Who says an earnings tax is the mos fair? Those who make more money often use fewer city services in exchange. I for one live and work in this city as well and find that the amount of tax abatements, TIFS and other government funds given away to special interests is downright deplorable (in governments as a whole, not just in the city).
Removing the city earnings tax puts us on an even tax footing with the rest of the region. The next step is to stop getting the areas to fight with each other as to who can give a developer or business the biggest tax break to move to their area. Why do I need to pay taxes to the city so they can turn around and give away that money to the grocery store, hardware store and my own employer? It's not like my boss is going to give me a raise because they got a tax break from the city. Instead, I keep the same pay and have to pay for part of their income from money they are taking away from me.
How is that “fair” again?
Curtis, you are mixing apples and oranges. Take away the TIF's you describe, the tax abatements, and other incentives used to create jobs and attract development (in blighted areas) and what exactly does the city gain by doing this?
You don't need to give away money to get development in blighted areas. ONSL didn't need public funds to work on the projects up there. Soulard didn't become what it is today by giving away tax money either.
What the city would gain is the same thing every other municipality around here would gain if they would all completely stop giving away tax incentives to business… tax dollars. There are well over a million people in the region. Those people need places to work, places to live, places to shop and places to be entertained. I don't need to give them my tax dollars for them to be in business. If I want them to be in business, I'll vote with my own wallet, not the public coffers. Public money is great for police, fire, trash, public health, and many other things, but not for a grocery store downtown. I'd also be willing to bet they don't have better prices or higher wages because they are getting tax dollars. Nope, that money is padding the wallets of the rich few, not helping the working class consumer who lives and works in our fair city. I promise people aren't saving millions in gas by having to travel an extra 10 minutes less to a grocery store they have down the street now.
I'm not mixing apples and oranges. The very same tax dollar that comes out of my paycheck in the form of earnings tax is the same one that is replacing the missing dollar offered to someone else in the form of Tax Abatement. For every tax dollar that isn't paid by someone, there is someone else who has to pick up the tab to keep our services.
Sorry to burst your bubble Curtis, but Old North has received substantial public and charitable support in its rebirth, all very well deserved to be sure.
Without public and charitable support, the rebirth of Old North would be years' behind where it is today, and you wouldn't be reading all the great stories about its revitalization that everyone sees in the news and online today.
ONSL made big strides that made the tax funding of Crown Square happen. It's all the work prior to Crown Square I was speaking of. It's a shame in our society we don't have the patience to let the redevelopment happen at a natural pace. We have to throw tax money away, robbing from future generations, so that we can have our redevelopment now.
Also, charitable money has nothing to do with what we are talking about here.
Believe what you want to believe, but the truth is there were two significant phases of publicly-financed redevelopment nearby in Old North before Crown Square. The public funds leverage the charitable contributions. It's all cooperation and shared vision. That's not counting any of the smaller projects in the neighborhood, many of which also benefit from tax abatement.
What??? ONSL and Soulard's success actually largely came about through tax credits and FHA financing like the 203k. Crown Square wouldn't have worked without public finance.
Their initial decline came about at the end of WW2 when public policy favored suburban development.
Les, if the earnings tax is “the most fair”, then why is it only imposed in KC and St. Louis?! Is every other city and county in the state clueless or wrong? I do agree that the sales tax impacts poorer people disproportionately, but I've yet to hear why a property tax is inherently unfair.
And to clarify, should the earnings tax be eliminated, I'm personally likely to have to pay more in taxes and fees. As a city resident, I do benefit from the “contributions” suburban residents make toward St. Louis' budget. My opposition to the earnings tax is pragmatic, on a more global level – if it's a reason or an excuse for wealthier people and/or for any business not to locate in the city, then it definitely needs to be addressed, much like how we need to address the perceptions (and the realities) about our public schools and our crime statistics. I'm invested in the city and I want to protect my investment; I don't want to be like Wellston or East St. Louis or Detroit.
I'm also not crazy enough to advocate eliminating the earnings tax and not finding alternate revenue streams – government does need predictable revenues to operate efficiently. But that doesn't mean that any one tax should be sacrosanct – St. Louis in 2010 is a different city than it was in 1985, 1960, 1935 or 1910, and the surrounding region has changed even more dramatically.
Finally, to rebut your assertion that non-residents don't pay any property taxes, this would only be true, as it is now, on residential properties. Any business passes its taxes on to their customers, be they property taxes, earnings taxes or gross receipts taxes – it's just another cost of doing business, not much different than rent or insurance.
First of all, this is a tax of 1%…1%! To believe that a tax this small so profoundly affects business and residential locational decisions is simply not demonstrated by any set of documented facts. The tax is imposed in KC and St. Louis because they are both regional employment and cultural centers that provide a level of services disproportionate to their share of the resident population. Yes, the property tax indeed has some very unfair consequences. Consider an older, retired couple with relatively small income (lots of these in the City) who have lived in a house for many years and pay the same rate of property tax as a younger, wealthier neighbor with a big income. Look, no tax is perfectly “fair.” But a tax on income, combined with taxes on property and consumption is probably as close as we can get. The historic disincentive to locate in the City has nothing to do with taxation, especially one so proportionately small as the St. Louis earnings tax. If it did, then nobody would live in New York City, San Francisco, Boston, etc. The problems of cities have been well documented…schools, public safety, supply of modern housing, etc. These conditions are driving locational decisions — not our small earnings tax. The reason people are drawn to “fixing” the earning tax is because we fancy it as simple solution to a very complex problem. To paraphrase H.L. Mencken, “For every complex problem, there is an answer that is clear, simple–and wrong.” Solutions to urban problems, and there are some, are not simple at all, and can't be solved by a simple ballot issue or government decision.
If you're a CEO making $200,000 a year, writing a check to the city for $2,000 IS a disincentive, especially if you could avoid it completely by moving your business to Clayton or Maryland Heights, and moving your home to Ladue or Chesterfield. And if you're struggling to earn $20,000 annually, writing a check for $200 can easily be a burden if you're living paycheck to paycheck. Another 1% may be small potatoes to you, but to many, many people, it IS an issue, epecially when, unlike the sales taxes we pay every day, you have to write one big check every year.
Finally, why is it inherently unfair to expect every property owner to pay their fair share? If you can't afford the taxes, selling is one option, getting a home equity loan is another. Just because you're on fixed income is no reason for special treatment from the government. Ameren, Laclede, AT&T, Charter, the plumber, the roofer and the painter all expect to be paid their current rates to serve, maintain or repair any home. The services any government provides increase at or in excess of the rate of inflation; they need to have their revenue sources keep pace, as well. And the part you're leaving out of the “older, retired couple with relatively small income (lots of these in the City) who have lived in a house for many years and pay the same rate of property tax as a younger, wealthier neighbor with a big income” analogy is the fact that the older couple probably own their home free and clear and their only carrying cost is the taxes; the younger, wealthier neighbor is paying for both a big mortgage plus taxes. Using your logic, losing one's job should also earn you a lower property tax rate, since you really can't afford to pay a higher one.
Everyone has the ability to pay their taxes, we all just have our limits on what we find to be acceptable – a combined federal, state and local level of 25%? 33%? 40%? 50%? 67%? 75%? 90%? Bottom line, if and when the ballot issue actually gets voted on, one of us will be proved wrong, and one will be proved correct, on whether or not the earnings tax is viewed as “one so proportionately small” to a majority of the voters.
JZ, yes, it's a disincentive. You've made that point how many times in this thread? The question is, what about the city? Is it worth sustaining? Is it worth living there? The earnings tax is a wedge issue, generally pitting fiscal conservatives against the city. Given the city's weak bargaining position in so many areas, the earnings tax, like so many other debates, turns into lots of people piling on the city and others saying “right on!”.
Agreed, it is a wedge issue, which is precisely why saying “don't touch it” is short-sighted. There is growing sentiment to look at all options, and while covering one's ears and repeating “La, La, La, La, I can't hear you” is certainly an option, it may not be the most effective one.
I agree, “The question is, what about the city? Is it worth sustaining? Is it worth living here?” I also agree that it is a complex issue, that you simply can't expect to cut any city's budget by 30% or 40% overnight. The challenge is that every existing program has a constituency, who will feel the impacts, directly, of any cuts, and they will work/scream to protect their slice of the public pie.
When things are good and tax revenues are increasing, it's sustainable and not too controvesial. But when revenues are flat or falling, as they are now, hard decisions need to be made on both the revenue and expenditure sides of the equation. Anything that is put “off limits” (the earnings tax, certain employee groups, keeping every school building open) simply means some other program or group will see even greater cuts. Which gets back to one's perception of “fair” – it is all about “my” taxes and “my” services . . .
Who in the CITY, what specific constituency, is proposing elimination of the earnings tax?
Anon, Just one point, I am a Conservative and I live and love the city. The city of St. louis is not ALL liberal probably less everyday. We are not trying to pile on the city in fact getting of the tax give the city a stronger baganing position. A city is not is services. That is not why people move here when I moved from St. Charles to the city it was because I love the city and want to make it better not keep it the same.
Again, nobody likes paying any taxes and there is no tax that is completely fair. But to put all the burden on property owners and not wage earners, would drive more people out of the city than you speculate is done by the earnings tax. And that guy in Ladue or Chesterfield is not about to move to the City, not because of the earnings tax, but because of the schools, perceived public safety issues, etc. The earnings tax is a red herring and is often used by business executives as an excuse for a location decision that is more driven by their own convenience amd their need to explain their abandonment of the City to their civic colleagues. The overall tax burden in the City of St. Louis is not that high. It is far higher in many municipalities in St. Charles County. The City has to take in revenue to provide services. How would you propose to do that? I think we can certainly discuss ideas about how to redistribute the tax burden in the City in a more optimal and equitable way, but the tax question needs to be examined broadly. And it needs to be done on a regional basis, because tax dollars (sales taxes, earnings taxes, etc.) do flow across jurisdictional boundaries. I think that is an important discussion, but to isolate the City's earnings tax is both unfair and unproductive.
Supply side economics are no more a fantasy than Keynesian economics that you seem to favor by the way how is that working for the country right now.
This thread made me go and dig out my handy “A Revenue Guide for Local Government”, published by the International City/County Management Association in 2005.
In regard to a local income tax, there are three different approaches which have been taken in our country.
The first option, which is adopted by St. Louis, Kansas City, the States of Kentucky and Ohio, and Wilmington, Delaware is that the tax is credited to the jurisdiction of employment. One flaw of this policy is that it generally overcompensates the central cities for their services to commuters and actually create an incentive for governments to export a large portion of the local tax burden.
The second option, which the tax is credited to the jurisdiction of residence, is adopted by Maryland and NYC. Indiana counties and Pennsylvania municipalities, except for Philadelphia, may only tax commuters if their jurisdiction of residence does not levy the tax. A flaw of this policy is that it generally undercompensates jurisdictions in regards to commuters. However, it can simplify administration and costs if piggybacked on the state tax.
The third option, is that the commuters are taxed at a lower rate than residents, being that they do not consume the amount of services that residents do. Michigan, Philadelphia and Yonkers, New York have taken this approach. Michigan limits the amount commuters are taxed to one half that of residents.
I summarized the appropriate section in the book and copied some of it verbatim. I thought it might add to the conversation. However, this does illustrate how few cities or states allow for the taxation policy that St. Louis City currently employs. It is arguable whether or not it is good or bad, but I thought that some might be willing to accept the third option, which taxes commuters less. There are a myriad of other revenue streams that the City could use to make up the shortfall, a few of which I suggested in my first post.
And how exactly will we make up for the lost revenue? Businesses will immediately relocate from St. Louis County and St. Charles? No.
Compared to other cities, St. Louis city tax rates are not high.
We're only going to see even larger cuts in services.
Keep the GOP out of our cities and Room 200. Their policies exacerbated our problems.
The GOP hasn't been in Room 200 since 1949. Just a side note in case you were unaware.
If you read my post directly above yours, I pointed out how few cities in the country have this type of taxation. I find it odd that two other cities and two other states have a tax policy similar to St. Louis. How has everyone else survived without it?
Furthermore, I only addressed the tip of the iceberg in my first post when it comes to alternative streams of revenue. I am personally opposed to the tax because my tax burden as an inner ring suburbanite overcompensates for the services that I receive during the work week.
I understand that exporting the tax burden is politically popular with residents, but it is a consideration when companies are looking to expand or relocate. I think that a tax policy such as that of Philadelphia or Michigan makes more sense and is inherently more fair.
I am not opposed to the local income tax as a whole, but those that defend it as necessary are not willing to place the tax burden on themselves, those who are the real consumers of the City's services.
Many cities actually have local income taxes. A conservative report from 1967:
http://www.taxfoundation.org/news/show/1815.html
Detroit, for example, is 2.5% for residents and 1.25% non-residents.
NYC is a lot higher.
Look at other cities and were a lot lower.
Though St. Louis City has had the largest amount of depopulation, comparing peek to current population, of any city in the world.
I think more would protest a regional tax sharing like the Zoo Museum District if only targeted towards the City. Though really the more affluent suburbs, called “point of sale suburbs,” need to share even more of their tax yield with the inner ring even more so as they currently do their sales tax. The inner ring and City simply cannot compete as much when it comes to issuing subsidy, because of the aforementioned overriding fear of the other. No amount of subsidy will bring development to Wellston nor North St. Louis without significant place erasing and redefinition. McKee knows that, though we disagree on methods, values, and implementation.
It is true that many cities have local income taxes. However, the state of Michigan limits commuters to half of what residents pay. NYC credits the tax to the jurisdiction of residency, not the jurisdiction of employment like STL. Our taxation policy is not widely implemented. There might be a reason for that.
Would you be opposed to a tax system such as that of Michigan which would limit what commuters pay? Do you agree that commuters overcompensate for the services they receive?
Also, in regard to Point of Sale cities, not all are affluent. Some cities can simply generate more income than the pool would give them, Rock Hill is an example. Addressing point of sale versus being part of the pool is a totally different issue. But that does bring up a question. Why would it be politically popular, politically feasible, or advantageous for a community such as Kirkwood to lower their take by sharing it with others?
No. As freeriders I think that commuters should pay more than residents. Like increasing traffic congestion through planning, thus they see an incentive to move to the City rather than the highway exodus. Moreover, commuters benefit from the City housing regionally disproportional amounts of the poor. Commuters benefit highly from working and not living in the city: their own government provides higher quality services with lower tax rates.
An inherently unique City would keep them from moving to another city. Cynically St. Louis provides minimal reasons to move to the City from suburban or to relocate to here from another City. This is why we are no growth.
Kirkwood, your example, should lower their share and give it to other municipalities if they don't want crime and blight to spill over into their areas. (Though Kirkwood has had solutions for this problem in the past: Meacham Park.) In the same manner the Central West End shouldn't have economically and physically built up their neighborhood, erecting defensible space barriers, while wholly ignoring areas immediately north like Fountain Park and Academy. It makes no sense to ignore poorer areas across town as they affect the region as a whole. Due to fragmentation and localism working together doesn't happen. Black Jack provides the historical example, while the failed merger of Clayton and Richmond Heights provides a contemporary example.
Commuters are no longer freeriders when their tax burden overcompensates for the services that they receive. Even if they paid no income tax in the City, their place of employment pays property taxes and utility taxes.
Furthermore, my government does provide far superior services than the City. However, my property tax burden is easily $1000 more a year than a comparably priced home in the City. I looked at that when I was home shopping. That goes against your assertion that I receive better services for less. I pay for my services, I also pay for your services which I do not get full benefit of. That is why I am advocating an option such as Michigan's which limits what a commuter can pay. I am not opposed to paying for what I receive.
In regard to Kirkwood sharing with other communities, that is a utopian dream. Why would the residents of Kirkwood knowingly reduce their services or raise their own taxes to benefit a place they wouldn't go to? It is idealistic, but politically unfeasible.
If you think that minimal reasons to live or move here why don't you leave and why do you even care about this issue.
We're a zero growth region due to fragmented government and decentralization. Rather than competing with other cities we fight amongst ourselves.
Not because of our high tax rates. Our fragmentation, through suburbanization, led to the passage of the earnings tax.
Regionally St. Louis City disproportionally has all of the poor due to exclusionary zoning. It also has older infrastructure since Post WW2 policies mainly funded new infrastructure in the suburbs. Sure we have the historic tax credit, but that's not enough. According to SLDC, as of 2009 the LRA alone owns at 9,801 parcels and 1,286 buildings. St. Louis City, of course, needs aldermanic and bureaucratic reform, but it does not need drastic cuts in revenue. (Excluding situations like the failed St. Louis Centre and new parking garage deal).
I'm not even touching on the cost of providing public safety, schools, etc., all of which are traditionally financed through property taxes. Though as people left (GOP/Reagan/Charles Tiebout said they should!) values declined and the yield. Thereby the earnings tax came into existence in order to capture freeriders who worked in the City and lived in suburbia. This yield though has also declined due to the decentralized office market where businesses largely aren't even located in City. We have vacancy rates over 20% and haven't built new Class A Downtown since 1989. The earnings tax isn't creating this cause! Our preference for localism and constant resistance to regional planning creates these problems.
If anything residents and business left due to discriminatory public policies — largely promoted by private lobbies through conservative politicians — not solely rational private action. Thus its ironic how the earnings tax becomes demonized as the sole factor hold back the City. Businesses resist the City due to decades of an entrenched mentality that fears the other (usually brown people) and preferences that still largely prefer the autocentric lifestyle and huge suburban house.
Those who want taxes cut assume essentially that the role of government isn't to provide services, but to only facilitate the private sector. They assume this maximizes personal household utility and that fundamentally the public good does not exit.
With this economic disaster we've seen the merits of “rational private action” and the denial of a public good: it's neither rational nor are consequences isolated to the private actor.
Great comment Douglas…totally agree. This is the reason why the subject of local tax reform needs to be approached on a comprehensive regional basis. Picking on the City's earnings tax as the source of all evil is both irrational and completely unproductive. We need intelligent discussion on taxation — not a discussion focussed on one jurisdiction and fueled by anti-tax, anti-urban voices.
So far, the tax repealers are leading in the poll, 55-46. That's not too surprising. Most St. Louis area residents do not live in the city, so they would not personally be affected by the loss of trash removal, street maintenance, police and fire services, etc. To them, St. Louis is about entertainment. They are entertained by the city's politics, racial challenges, homelessness, crime, building decay, dilapidated neighborhoods, and lousy schools. If they can exarcerbate the situation by cutting off the city's financial resources, it just improves the entertainment value. (Rolling eyes now…) there's your “incentive”, JZ.
anon, you seem to assume that if the earnings tax were eliminated, it would not be largely replaced by other taxes and fees. You obviously don't know how government operates – it's always easier to increase revenue than to decrease expenditures. Something like 10 of the 50 states do not impose a personal income tax. Is their aggregate tax burden any less? No – they have higher sales taxes, more toll roads and higher property taxes. I would expect the same here.
And, earlier, you asked, “Who in the CITY, what specific constituency, is proposing elimination of the earnings tax?” People, like me, who are looking at the future, not just the present. The city needs to grow, both population-wise and economically. We need to be competetive with our suburban neighbors, and we need to address ALL of the negative stereotypes that are used against us, including the earnings tax, our crime stats and our public school system. Reducing or eliminating the earnings tax is the simplest solution. It could also be tweaked, as Fenian described, or changed to a flat monthly fee, like Denver imposes. There's also the potential to better market it as just one component of a comprehensive tax package that is much lower than that found in suburban areas (if that's actually the case). What will be a real non-starter is talk of exempting certain businesses from it (as an economic development tol), as was done in trying to attract that law firm to Ballpark Village.
So far, every alternative proposed to replace the earnings tax has been regressive against low income people. St. Louis is about 70% low income. How exactly is this supposed to work again? Let's get away from the semantics. Let's talk about the real world impacts. Cutting services and raising fees on a 70% low income city population sounds like an unmitigated disaster. But, what do I know? Maybe I'm just lacking the proper vision?
Maybe. And, “every alternative proposed to replace the earnings tax has been regressive against” higher income people, as well. It ain't rocket science. If we, a city of 365,000, can't collect as much from nonresidents as we currently do, we're either going to have to tax ourselves, all of us, more, to maintain existing service levels, OR we're going to have to reduce services to match whatever reduced budget we'll have.
The obvious short-term answer is to keep the existing earnings tax. The less obvious answer is what to do long term? If our population continues to grow, even at a slow rate, and the number of employees working in town continues to grow, as well, in other than minimum-wage positions, revenues from the earnings tax will continue to grow at a similar rate. Change one or more component from positive to negative and you can easily accelerate a downward spiral – instead of 70% being poor, what if the number is 80%? Instead of adding jobs, we continue to see contraction in both jobs and wages? Bottom line, it doesn't matter what taxes we're imposing if we're growing and gentrifying. It does matter, big time, if we're shrinking and getting poorer. It's not much different from the challenges facing Social Security and Medicare (impending insolvency versus maintaining present levels of service).
JZ, maybe you should run for public office. We need leaders who are willing to take a stand on the tough issues.
JZ,
What?
How can the government addressing crime when we cut sources of revenue? Do you favor privatization?
Most importantly, the earnings tax and other “stereotypes” should not be addressed to placate the suburbanites that left us thus causing, or at least exacerbating, the problems which form their generalizations.
You can't address an irrational stereotype which has no basis in reality, but rather fear and ignorance, with public policy. Unless you're a member of the Bush Administration or Clinton during Welfare form, that is.
To quote political scientist Anthony Downs from New Visions for a Metropolitan America:
“However, most Americans do not realize that in attaining their goals is responsible for the results they abhor. Even when confronted by overwhelming evidence, they find it much easier to blame traffic congestion and other urban ills (crime, business divestment) one some scapegoat (black people, earnings tax) than to recognize that their own habitual behavior that causes them” (7).
The earnings tax, if anything, should be increased for those that benefit indirectly from our high crime, low education, and vacant properties — insofar as our underdevelopment came with their success. Beyond that regional governmental consolidation must occur, especially the school districts, so that our children are not encumbered and limited by the localism of their neighborhood. Ideally the preservation of the neighborhood should be promoted, and the neighborhood school as Ittner intended as a community center, but that becomes increasingly difficult without adequate funding and declining enrollment. I think the real solution must be as what Judge William Hungate promoted: one unified regional school district with one budget where some suburban kids attend urban schools and the inverse. This would not only begin to address the issue of regional governmental fragmentation but also unity and identity.
I see an ethical problem in asking one municipality, which has the supermajority of the regions problems, to make cuts simply for the preferences of suburbanites and republican business leaders who really play a significant role in its decline.
You look to the future but perhaps you should look more at the past and present. We've issued subsidy after subsidy for corporations and yet the regional fighting continues, our children remain undereducated, and our neighborhoods in decline. I don't think it's a fiscal issue or anything that one municipality's public policy can redress. I think it's going to require massive regional reorganization and a fundamental cultural shift that abandons not our neighborhoods, but the fear and mistrust that decades of hate propagated towards our cities and their lawful residents.
This fear and mistrust exists internally within the city and it extends regionally. That holds us back far more than any fiscal issue.
It's complete bullshit that suburbanites more farther and farther away while complaining about our problems telling us what to do — the earnings tax — and offer not their money or a helping hand. But asking first we reduce their taxes before they “maybe” move back? No.
Doug, while I'm a big believer in the concept of looking at, on a regular basis, how efficiently any governmental entity delivers its services, I don't know enough about how well or poorly the city is doing to be in a position to make any strong recommendations (other than cutting the number of streetlights in half). That said, my support for reducing, restructuring or eliminating the earnings tax assumes that its revenues will be replaced by “new” ones from other sources. And will there be “winners” and “losers? Absolutely. That's the fundamental nature of any tax system. This should also address your initial concerns about “addressing crime when we cut sources of revenue”. While I see privatization as one potential answer, it's by no means the only one – I've seen plenty of examples where the government does a better job than the private sector does.
That said, I kind of agree with your diatribe on why we need to stick it to all of those suburbanites who have “abandoned” the city. The fundamental problem is that the world has changed, a lot, since the earnings tax was first implemented. Back then, there were a lot more of “us” than “them”, and “they” had little option other than to pay up. Now, the tables are turned – there are a whole lot more of “them” than “us”, and there are many more options for avoiding the city, entirely.
That leaves us with two options. One, we can do as you advocate, stand our ground, and increase taxes on commuters, because it's the “right” thing to do. Two, we can listen to all those “outsiders”' concerns and attempt to address, or, at least, mitigate them. Stick versus honey. I'm in the camp of trying to fix what's not working, and making the city more attractive to more people and more businesses (not everyone, but more). I've seen this happen in my lifetime in both Chicago and Denver, and it's never been just one thing, it's been a series of successful initiatives (and leaders) that have grown the local economies and made the core city cool again.
While it's going to take time and some fundamental changes to improve our schools and to reduce our crime rate, the earnings tax is one of those “quick fixes”, something that can be done fairly quickly and decisively to actually change perceptions. And, as much as you want to fight or deny it, perception IS reality! East St. Louis. East LA. Detroit. Wellston. Pagedale. Bedford-Stuyvesant. Newark. Camden. Oakland. Appalachia. I don't want to see St. Louis lumped in with them. I'd much rather see us being seen as a viable alternative to Portland, Nashville, Phoenix, Tampa, Pittsburgh, Austin or Denver . . . .
Jim,
Sometimes I think that I don't want suburbanites moving back here. Why? They're too used to parking garages, vinyl, and their big yards. I'd rather focus on attracting people from larger cities who are used to density, but dislike the higher cost of living. They would move here and expect to have trouble finding a parking spot — not expect a lot on every corner. They might actually walk to Target if they lived two blocks away like I do.
I don't want the city to seem cool for someone from Chesterfield. I don't want City Garden to be the best we can do. And honestly if we had a real urban city that has the spontanous diverse street life, with unique neighborhoods and commerical districts then 1% would be inconsequential. If corporate pirates want to extort us then ignore them.
Attract from other citites. Nationally and Internationally. We should ignore the shouts coming from suburbia all together.
Honestly St. Louis really did this to itself by destroying so many small businessess with the demolitions in Hop Alley, Mill Creek, and Real Estate Row. If we supported local business growth, with our low rents in rehabbed office buildings, then we wouldn't be so reliant on larger firms like for example TC. In this manner we should put as many resources as possible into incubators, especially targeting minorities.
Douglas-
When I was looking for a house, I did look in Dogtown, St. Louis Hills as well as Lindenwood Park. I decided however, to move to an inner-ring suburb. Why? In spite of paying higher property taxes, I could send my kids to public schools without apprehension. I say that while acknowledging that my father is a STL teacher and resident. I have heard his stories of non-existent supply budgets, metal detectors, and violence.
Furthermore, I do work in the City, however, my wife does not. If I included the earnings tax that my wife would pay, I am only paying a few hundred more in property taxes than I would by living in the City. When one looks at the cost of private or parochial schools (easily $5k a child), it becomes apparent that it is a better option for me to live in the county and commute.
I am telling you this because I would live in the City. However, for those raising families, it is not always the best option. My house is over 100 years old, and I do not have a big yard. What I do have, is a community that is walkable, safe and a great place to raise kids.
Many suburbanites are not opposed to City living. However, the schools would be the first thing that would have to change before I could move there. The earnings tax is more of an annoyance than anything, but it does weigh in my decisions.
I do want the City to succeed. I work there, socialize there, and would love to call it home. I think that you and I have similar goals in the end, but very different ways of approaching the problems.
Fenian,
Why did you look at houses in all those city neighborhoods if your ultimate decision of where to move had nothing to do with the city “neighborhood” at all?
I looked at those neighborhoods because I have family that lives in those places. Those neighborhoods are safe, well-maintained and have architecture that I like.
Ultimately though, it would be more expensive for me to live in those places because of the cost of private education. The schools were the deciding factor. I would rather pay the $1,000 more in property taxes, than pay $5k and up per child per year. I simply couldn't afford that. Again, the earnings tax is more of an annoyance than anything. I think that many people with children choose to live in the county because of the schools, not because they are afraid of brown people or whatever silliness was said earlier in the thread.
So what you're really saying is that the city is too expensive. Isn't that ironic? And everyone thinks the city is so undesirable. Yet really, it's too expensive. Isn't that delicious? It sounds like you live in Webster, Glendale, Richmond Heights, Maplewood, or Kirkwood. Possibly Glendale or Ferguson. You do know that most people sending their kids to private schools live in St. Louis County, right? Hell, the best private high schools are all located in St. Louis County.
st louis u high is in the city of st louis
And so is Bishop DuBourg, St. Mary's, Rosati Kain, St. Elizabeth Academy, New City School, Crossroads, and Cardinal Newman.
Meanwhile, St. Louis County has Country Day, St. Joseph's Academy, John Burroughs, DeSmet, Nerinx Hall, Cor Jesu Academy, Visitation Academy, John F. Kennedy, Ursuline, Notre Dame, CBC, Trinity, Vianney, Incarnate Word, Bais Yaakov, Block Yeshiva, Chaminade, Lutheran North, Lutheran South, Principia, Priory, Villa Duchesne, Westminster, Whitfield.
In St. Louis, the cult of “where you went to high school” extends well into St. Louis County. Public school kids are all looked down on compared to the elite attendees of our region's fine private and parochial schools.
That's why its so funny to hear County people knock the city over its public school system, when indeed, most enrollees of private schools in St. Louis City and County come from St. Louis County.
Agree. Plus trying to convince a conservative from O'Fallon to move to the city would be an exercise in futiliy. Better to focus on people and small businesses from other cities. A lot of growth in Seattle, Portland, Boise, Salt Lake City, Denver, Phoenix and Las Vegas came/comes from Californians looking for a lower cost of living and fewer government restrictions. We're significantly lower than many of them, now, so they could easily be the focus of an effective marketing campaign, but we still need to address those nagging perception issues . . .
Agreed. The same economic issues that made/make places like Seattle, Portland, Salt Lake City, Denver and Phoenix attractive to Californians could make St. Louis attractive to residents of those and other cities.
Can you explain why the earnings tax impairs the city's ability to lure ten 50-person businesses?
The region's largest new proposed commercial development project is McEagle's Northside Regeneration. McEagle is talking about creating 22,000 permanent jobs and luring large employers. Never has any representative of McEagle discussed the earnings tax as an impediment to their project and their efforts to lure major employers. They have talked about the lack of large plots of land, which is a point that's been made by developers and government officials as far back as the 1930s. Perhaps this earnings tax debate is just the most recent manifestation of the mythic hunt for That Thing that is keeping the city from economic growth.
Would that be anything like the Creature from the Black Lagoon? Michael, I think you're onto something.
“Fenian”: Another of the “if you fix the schools, we’d move into the city” demographic. There will be no satisfying them. Write them off. Collect his earnings taxes. He made it clear. He “uses” the city for entertainment, etc. Collecting earnings taxes from his household income is the right thing to do.
Now if we could just figure out a way to collect more revenue from all those other people who “use” the amenities the city offers, but pay little to help keep the city financially viable. Yes, I’m talking to you, Mardis Gras partiers, CWE restaurant diners, Forest Park balloon glow visitors, and on and on.
Hypothetical example: BFD Advertising wants to relocate from Chicago to the St. Louis area. They have 50 employees with an average salary of $40,000, which yields a total payroll of $2 million. If they locate in the city, the city will receive $20,000 annually from the 1% tax. If they locate in Clayton or U City, they and their employees will save part or all of that, depending on where they choose to live. Whether $20,000 “impairs the city's ability to lure” this business into the city depends on ones' perspective, THEIR perspective. If they need an excuse, it can be an excuse, along with crime, schools, rental rates and the availability of the “right” space. If they want to be the city, it can easily become a non-issue, especially if other assets are emphasized and appreciated (lower rental rates, more unique office options). The challenge is making it beyond the “first cut”, onto the “short list”. In business today, spreadsheets play an important role. In any analysis, when one group of options come with a zero or low “cost”, and others come with a built-in $20,000 cost, red flags can and do go up. It may not be fair or even rational, and it's probably too simplistic, but I've said it before – perception IS reality, and if we're the only city in the area with this perceived negative, we're playing at a disadvantage.
As for McKee's project, the same issues apply . . .
JZ, you've really done a fine job highlighting the many disadvantages of locating a business in the city. You've also made it clear that the city has many other drawbacks besides the earnings tax (crime, lousy schools, urban vs. suburban floor plates, etc). You've done so with such aplomb that we all wonder, why don't you move to Fenton or St. Charles? I'm sure that you and “Fenian” could have many long discussions about how to improve the poor, horrid, disadvantaged, city of St. Louis. Meanwhile, your suburban neighbors would yawn, and pour themselves another bubbly.
This thread has become oh so tiresome, cliche, and uninspiring. It has surely set a record for the most comments for an UR post. Yet has anyone learned a single thing?
Yes, but if the location decision is truly rational, BFD will consider all of their costs including other taxes, rent, etc. For example, if rent in Clayton is $25 a square foot compared to $15 a square foot in downtown St. Louis (these are reasonably realistic numbers) and they use 10,000 square feet for their 50 employees, the excess rent to locate in Clayton would be $100,000 a year. Many of their employees may use public transit, which serves downtown far better, and because they are in advertising, they employ many young creative people who like living downtown (some actually live downtown). As it turns out, many advertising and creative businesses are indeed locating downtown for all of those reasons. As I've said before, the earnings tax needs to be considered in an overall context and shouldn't be demonized.
Ahh, gotta love that “America, Love It Or Leave It” response”. While you obviously believe in the “if it ain't broke, don't fix it” style of government, I'm more inclined to look at the bigger picture. I also choose to live in the city, warts and all, and, like you, this gives me the same right to express my opinions and to advocate for or against any initiatives that I find to be important. And since the city's loss of jobs and population over the past half century parallels, among other things, the time the earnings tax has been collected, it would be foolish not to look at its impacts. But based on your responses, I'm guessing that you have more at stake than just whether your trash gets picked uo once a week instead of twice a week . . .
The depopulation of the city has far more to do with white flight, black flight, and the integration of city schools than the earnings tax.
I agree the earnings tax did not cause our population decline. I think it currently contributes to a perception of the city that prevents an increase in population. But the solution is not to just eliminate it. The solution is to study all revenue models and 1) show we have better alternative revenue options or 2) show the earnings tax (possibly modified at 50% for commuters) is a valid 21st century revenue solution for the City of St. Louis.
Precisely because it IS “one tax in one city”. It's perceived to be an additional burden that no other government in the region collects. It's as simple as “They do, we don't, so we're the better deal.” May not be fair, may not even be accurate, but it IS out there!
OK, so how about the parks tax when you shop at Brentwood square, or the 1% transportation development district tax that you pay at the Promenade on Eager Rd? The special taxing districts and dedicated sales taxes in municipalities can be 2-3% or more of your retail purchases….different in every municipality. These taxes aren't as visible as the earnings tax because you pay them in tiny bits every time that you shop, but they are a huge source of income (usually the primary source of income) for municipalities. The point is that your tax dollars are left all over the region in literally hundreds of special taxes in a hundred different municipalities. Shouldn't everything be on the table? Why pick on the City of St. Louis?
Your point should be the take away message – put it all on the table to see what works and what doesn't. I don't for a minute think the current structure of our region is the best solution. My hope is the attack on the earnings tax in St. Louis can become a push to look at the many ways the region funds services.
Few people do the same in-depth analysis of the taxes they're paying when they're buying that new flat-screen TV as when they're sigining a five or ten-year commercial lease or buying their home. That's why sales taxes have become the preferred way to extract money from the taxpayer – death by a thousand cuts, and definitely not nearly as transparent!
And then there's this: PROPERTY TAX REPLACEMENT SALES TAX … H.B. 1361 (Komo) Authorizes the governing body of any political subdivision to abolish its property tax and replace it with a sales tax. Establishes an initiative petition process for the repeal of the sales tax, holding out the possibility the political subdivision will be left with neither a sales tax nor a property tax. Your Missouri Legislature at work!
Dismissed by many previously: “'We have more parks to maintain.' We have less than half the population we had fifty years ago – let's sell some off.” Reality (in Detroit) today: http://www.detnews.com/article/20100206/METRO/2…