St. Louis’ Earnings Tax
In order to pay for collective services governments must tax citizens to get the money. Of course, we don’t all directly use all the services. For example, I don’t have kids yet I’ve helped fund schools. I don’t directly use this service, but I value what it does for the community I live in. So we all live here and we pool our money to buy shared services. If we were to take away a big chunk of that pooled money, by eliminating the 1% earnings tax, then we’d need to reduce services or tax ourselves some other way — or a combination of both.
The wealthiest among us seek to do locally what they’ve done nationally — reduce their tax burden. This shifts the burden to the rest of us — the lower we are on the economic scale the more we get squeezed.
Say you’re a partner in a downtown law firm who lives in West St. Louis County, with a base salary of $250,000/yr — this means you pay $2,500 to the City of St. Louis. But, if the earnings tax was replaced by higher sales and/or property taxes you’d still save money every year. You’d threaten to move the firm to Clayton unless it received huge concessions — offsetting the increased property taxes. Business lunches would cost a bit more with higher sales taxes but you could always scale back tips — besides that’s all deductible businesses expenses. Personal purchases are made in the county or online. This individual now saves lots of money but begins to complain about potholes on the way into his office, smug in his decision to live outside the city.
I’m all for evaluating our revenue and expenses — doing so it wise — but we must be realistic about new revenues replacing old ones. Look at Kansas as an example:
In short, it’s easy to determine that by far the biggest single contributing factor to Kansas’ fiscal problems today are the income tax cuts — not bogeyman excuses cooked up by Brownback or any of his boosters. (No kidding: Facts show Brownback’s tax cuts caused Kansas’ revenue plunge)
Fantasy: cut the tax rate expecting the economy to boom as a result so total revenue would remain the same. Reality: cut tax rates make the wealthy even richer, economy stalls because less money is being circulated. Services are cut, further dampening the economy. Education & infrastructure funding are cut, making the state less and less attractive except to anti-tax types.
The results from the Sunday Poll:
Q: St. Louis’ 1% earnings tax… (PICK UP TO TWO)
- revenue is too critical to eliminate 18 [34.62%]
- should be left unchanged 11 [21.15%]
- should be matched by an earnings tax in surrounding counties 8 [15.38%]
- should be replaced by another tax 7 [13.46%]
- should be reduced incrementally over the next 10-25 years 4 [7.69%]
- should be eliminated at once 3 [5.77%]
- should be increased 1 [1.92%]
- should be reduced, but not eliminated 0 [0%]
- unsure/no opinion 0 [0%]
Of course, one municipality in a highly-balkanized region is different than a state. Still, the idea of slashing taxes to create a wave a new revenue from newfound influx of people and jobs is unfounded — especially with obligatory cuts in services.
Instead of eliminating St. Louis’ earnings tax we need to add an earnings tax to other counties in the region — though perhaps not 1%. This would even up the playing field — reducing moves from one political jurisdiction to another. Use the revenue to make the entire region attractive to outsiders so we get real growth.
— Steve Patterson
Another aspect to consider is that many employers are tax exempt, so a property tax increase doesn’t make up for the earnings tax loss. Even the BJC HQ building is tax exempt.
For those citing the earnings tax as reason to move jobs out or not move them in now, if it went away, they’ll just cite crime or something else as reasons.
I would like to see property taxes eliminated entirely. Property taxes by their nature are unfairly applied and inefficient at collecting revenue. Instead I would like to see a flat earning tax placed on all income earned within the state and each city to be distributed. Say 5% to the state and 1% to the city and go from there.
What a cute, rambling allegory!
Not surprised to see the majority in favor of maintaining or increasing the current earnings tax. I do believe that, for the most part, those who work or live in the City support/love the City and are fine bucking up 1%.
What riles people though is how that money is used, the (lack of) public process in determining it, and the piles of abatements and exemptions made across St. Louis that wouldn’t exist if the City only recognized its self-worth and demanded quality development and business growth without all the breaks.
One more note on the subject of earnings tax and the Rams stadium: If City voters approve funding for a new stadium, there had better be a requirement that the Rams move its headquarters/operations into the City of St. Louis. This is a real opportunity for City leaders to make that common-sense demand; and if they don’t it is a massively-missed opportunity and a serious indictment on the ability of our local government to do its job.
Do the vast majority of major cities in this country that are experiencing substantial growth have an earnings tax? Nope. St. Louis is addicted to it like crack though. Also, “the biggest single contributing factor to Kansas’ fiscal problems today are the income tax cuts ” is a total myth (http://wichitaliberty.org/kansas-government/myth-kansas-tax-cuts-havent-boosted-economy/).
Here’s a synopsis of cities, counties and even school districts that have income taxes.
http://taxes.about.com/od/statetaxes/a/City-Income-Taxes.htm
When a tax is imposed by multiple jurisdictions within a region, it becomes pervasive, a fact of life (like sales taxes, here). When only one jurisdiction imposes a discrete, very evident, tax, within a region, it beomes easier to view that tax as something to avoid. I don’t know Birmingham well, but I do know that its suburban areas are growing, much like the suburban areas are, around here. I lived in Denver for years, so I paid the Occupational Privilege Tax, for years, a well. The difference, there is that it’s a flat tax, and the employee pays $2.00 a month and the employer pays $3.75 a month, per employee. If you’re an employee making $30,000 a year, a $24 annual tax, with a $1 taken out of each paycheck, is no big deal; a $300 annual tax, that requires filing a separate form, and potentially writing a check, IS a big deal! And if you’re a $100,000 employee . . . .
It is a more visible tax for sure. The sales tax at Pi in the Loop is 12.3% and it doesn’t deter people. Property taxes in Clayton are 8.555, while in the city it’s 7.5874, but that’s hidden from employees and renters. That difference could easily make your total local tax burden more than if your house were in the city. But you get good schools and low crime in Clayton, so it’s worth it, which should be of much higher concern than hand wringing over the earnings tax.
Sales taxes are a cruel mistress. They haven’t recovered form the recession in Ellisville and Ferguson. In Ellisville incomes have been stable compared to its sales. Diversified tax types is good idea considering the regional policy of undermining property values and the ease with which sales tax producing businesses move and the whims of shoppers.
I’ll take the earnings tax over the NoCo traffic ticket tax.
It’d be great to get rid of it, but it’d have to be a apart of a larger government restructuring or revenue sharing scheme.
The three concepts that you seem to be espousing are to tax the rich (more), more taxes are better (because more $$$$), and to tax non-residents (because we can). The underlying concept seems to be let’s find “free” tax money so we don’t have to tax / pay for stuff ourselves! I have no problem imposing an income tax on city residents, to fund city services, any more than I would object to local property or local sales taxes. My objections kick in when cities try and find “creative” ways to tax non-residents, in spite of the fact that they don’t get to vote for the taxes or to have any input on how their “contributions” are being spent! It’s that fundamental concept of no taxation without representation.
I get it, the city has a huge budget to feed – aging infrastructure, legacy pension costs, declining property values (in many parts of town), fewer taxpaying residents and businesses to squeeze and a crime wave that needs “fixing” – but it’s also maxed out most of its potential revenue sources – sales taxes, property taxes, lodging taxes, plus fees of all sorts. Like any major tax source, the earnings tax is truly addictive. And my perception is not that “the idea of slashing taxes [will] create a wave a new revenue from newfound influx of people and jobs”, my perception that the opposite is occuring, and that city is being bypassed (and, often, not even being considered) because NO other city or county within 100 miles is imposing a similar tax.
And I certainly don’t expect unilateral tax cuts – any effort to reduce / eliminate the earnings tax would require identifying replacement funding. Just saying “no!” to TIF’s would be a huge first step, as would gradually increasing property taxes on ALL city properties, both residential and non-residential. Government should treat all of its constituents equally, and every time we give away a tax break, we give away regular revenue, as well.
Regarding TIFs, my issue is moreso the city’s (or region’s, I guess, but care more about the City) lack of direction in determining when, where and for what purposes they’re being used. This is yet another instance where the City has an opportunity to direct exactly what the business/developer receiving these breaks can and cannot do. The City can dictate how something is built, limit areas where it’s built and how it fits into a larger growth strategy (i.e. activating low-dev areas, exceling growth areas, etc.) Instead, what we actually get is a Board of Alderman that consistently forgoes its strength-position, and just gives the incentives out without oversight or guidance to the final product.
I’m surprised that no one has brought up the fact that the city earnings tax is a write off on your federal taxes and if you’re an IL resident state taxes. So now we have other governments reimbursing those who paid the city tax. Makes zero sense, but the pro tax socialist would never want you to know that.