Poll On Proposition A On Local Earnings Taxes
Missouri voters will decide in November on a proposition concerning the 1% earnings tax levied by Kansas City and St. Louis:
If passed, Proposition A would require the two cities to hold referendums on the tax every five years, with the first likely next spring. If voters elected to repeal the tax, it would be phased out over a decade. (Source)
I normally like the idea of putting such decisions at the local level but I know if Prop A passes there will be battles every five years. Â If there are proposals for other ways to collect the necessary revenue to support the services provided by Kansas City & St. Louis I’d be fine with eliminating the earnings tax.
The poll is in the upper right sidebar for the next week.
– Steve Patterson
Eliminating it would be a nightmare on Elm Street, St. Louis style. The 1% SALES TAX generates nearly 1/3 of the city's budget. At some point in time, maybe, maybe, it's something to be considered. Further, the language should be very clear so as not to confuse voters. Tricky language has done in many legislative bills.
My opinion is we should focus our energies on POSITIVES, like increasing the population of the city so we could have a flourising tax base. My prayer is that we would stop getting distracted by issues perhaps looking to derail the forward march of our city. Our population once stood well over 700K. It's time to head that way again sooner rather than later!
What we should be voting on is not even entertaining the conversation until population has reached a certain threshold. A target population of 700,000 would be a great start!!!
It's an earnings tax, not a sales tax . . .
Prop A is wrong on some many levels. This is billionaire Rex Sinquefield's baby (surprised you didn't mention that) There is no real proposal by the millionaires and billionaires who are driving this, on what is going to go in place of this for KC and STL. This is at least 1/3 of STLs revenue and will be a huge blow to the City. *** VOTE NO on A!
Mixed feelings. Since it's a third of our current budget, finding an appropriate alternate source WILL be difficult. Local taxes should be left to local voters to decide, not someone who doesn't even live near here. And, there is a certain attraction to taxing non-residents/lower consumers of city services, be it earnings taxes, sales taxes, lodging taxes, seat taxes, rental car taxes, etc, etc, etc.
That said, the earnings tax continues to be a disincentive in attracting new businesses into the city. I agree with Karen, the best solution will be to make St. Louis a more attractive place to live and work, to regain some of the stature and clout that has moved out over the last half century. To put it bluntly, successful people and successful businesses require fewer government services than unsuccessful ones.
Ideally, the city should be looking, on its own. to reduce its dependence on the earnings tax, but like too many taxes, it's really hard to turn away from it, unless forced to. Like other cities that are highly dependent on sales taxes or proiperty taxes, both of which have gone down in the recession, the ONLY way to focus on reducing services and/or developing new, more-sustainable sources, is to take away the existing gravy train.
The fundamental issue with the earnings tax is that St. Louis is no longer the big fish in a small pond. We're one of the many, many communities that make up the larger St. Louis region. If even a few more communities were imposing an earnings tax, this would be a non-issue, much like how sales taxes are essentialy a non-issue. But since we're the ONLY one in the region, it's no surprise that the earnings tax is being questioned, and avoided, both inside and outside the city.
I think it would be a disaster given that the tax provides such a large chunk of the budget. I hate to think what will happen to the city with a third of its budget gone. I also have to ask why people in say, the Ozarks should vote on whether the city can have this tax or not.
The earnings tax is a regional tax, since it taxes both residents of St. Louis and non-residents who work in the City. That is entirely appropriate since the City provides services to the daytime population of employees, it houses most regional events and sporting venues, and it often serves as a service-provider for many of the region's poor and and homeless. The likelihood of the earnings tax being replaced by popular vote with another such regional tax is nil. The alternative is to replace this regional tax with one paid solely by the residents of the City of St. Louis, such as the property tax (the alternative suggested by Sinquefield's wholly owned Show-Me Institute), or raising the sales tax to unimaginable levels. It's absurd to think that either of those alternatives would somehow make the City more “attractive.” In fact, despite some of the faux-academic research that supports this ballot initiative, the earnings tax is the most equitable and productive method of supporting public services in the City and there is absolutely no credible evidence from cities elsewhere in the country that earnings taxes are a disincentive for growth.
This ballot initiative is bought and paid for by one individual, who has used his fortune not only to buy petition signatures but to silence political opposition; that alone should merit a no vote. And the theory behind it, that the earnings tax discourages growth, has no basis in fact. What will indeed discourage growth is a further erosion of essential public services in the City — all but inevitable if the earnings tax goes away. By the way, does anyone wonder how the City will be able to borrow money to support capital improvements when bondholders will have to wonder every five years whether voters might strip the City of 1/3 of its revenue?
This ballot initiative is an unmitigated disaster for the City of St. Louis. It needs to be defeated.
This is a “regional tax” only insofar that the city is the only entity in the region imposing one. Suppose Clayton, Chesterfield, Ladue, Earth City and/or Creve Coeur decided to implement an earnings tax, as well (not totally far fetched in this environment of falling revenues). As a city resident who works outside the city, I could very easily be taxed twice, once for where I work and another time for where I live. Throw in a working spouse, and you potentially add a third local income tax.
You assert that the tax “is entirely appropriate since the City provides services to the daytime population of employees, it houses most regional events and sporting venues, and it often serves as a service-provider for many of the region's poor and and homeless.” Every city with employment centers see their daytime populations swell, and the vast majority address this directly by taxing commercial property at higher rates than residential property. But I guess in a world of TIF's, tax credits and who-you-know underassessments, we don't want to face the problem head on. Plus an increasing number of St. Louis residents are now working outside the city, reducing, not increasing, the need for city services while we're “away” every day.
Many regional events and facilities are either money makers or have separate, regional funding sources (zoo, art museum, Forest Park, Busch). If they're not, maybe we need to reexamine their value. Do events like a marathon or Open Streets really add to the city, or should we let St. Charles, for example, shoulder both the burden and the glory? Or do we just gravitate to unprofitable ventures, and let the Six Flags of the world get away?
I do agree on the issue of us being the de facto “service-provider for many of the region's poor and and homeless.” But I also believe that this a regional problem that requires a regional solution that includes suburban communities supporting the solution financially, not us sticking it to their individual residents who work in the city.
Finally, you assert “the theory behind it, that the earnings tax discourages growth, has no basis in fact.” Then why did A-B build an office campus in Sunset Hills? Breweries around the country? Why did Mastercard locate in St. Charles County? Why did GM move their plant from North City to Wentzville? Why is Monsanto's campus where it is? Why are Build-A-Bear's, Express Scripts', Enterprise's and Energizer's world headquarters all located in the county? And why have I heard more than one suburban business owner state that they would never consider locating in the city as long as there is an earnings tax in place?
Taxes (and “fees”) are a fact of life. Everyone has taxes they find to be more onerous and/or “unfair” than others. Some Illinois cities impose a “wheel tax”, a separate tax for the privilege of owning a motor vehicle in their city. We're now paying for trash pickup in the city because there was no other easy source to generate new revenue. Areas with no sales taxes have a lot more toll roads. If Prop A passes AND the city's residents vote it out, then, yes, some hard choices will need to be made. But to say that just because it generates a third of our current revenue makes it sacrosanct is ignoring reality. Perception is reality, and the perception is that living and working outside the city is cheaper.
Yes, the City is the only entity in our region imposing a sales tax, but it is in a unique position as the region's central city and downtown. So you really think the City of Ladue provides regional functions? Indeed, I think a better solution to our local tax problem is to impose an earnings tax regionwide and roll back sales and property taxes. And of course there would be a reciprocal arrangement so that you only paid tax to one jurisdiction, or there would be some kind of tax-sharing arrangement (its hardly unusual to pay taxes on earnings to two jurisdictions — we pay state and federal income tax, right?).
The fact is that we consume public services in a variety of places and it is probably more reasonable to align our tax payments with the place where we get services. Right now if you live in the City, use the city's public schools, and are protected by the City's police and fire services, but you shop in Brentwood, Richmond Heights and Hazelwood, you are exporting your tax dollars to municipalities that do not have any responsibility for providing services to you. And if you work outside of the City and are “away all day,” you're still consuming the most costly services at home.
As far as taxing commercial property at a higher rate than residential, the same equalization rates apply in the City and County. And now, abatements are just as common in places like Clayton (think Centene) or St. Louis County (think Express Scripts, Northpark, Edward Jones, etc.) and the City is forced to do the same to keep up.
Hosting regional events like parades, Fair St. Louis, Mardi Gras, etc. is actually quite expensive for the City. The City must pay most of the cost of furnishing security, for example, which runs many millions of dollars. While we could argue that the sponsors of those events should cover the excess costs, that simply isn't the reality. And do we really think that the VP or Thanksgiving parade should be in Chesterfield or O'Fallon? Or do we think the region would be a better place if those events ceased to exist? I don't think so.
There is actually a fair amount of research on the effect of earnings taxes on growth and development and the results are entirely inconclusive. All of the companies that you mention have different reasons for their locational decisions. Perhaps their executives live in the 'burbs and want a shorter commute, perhaps a suburban community offered them a better deal on a subsidy (e.g. MasterCard from O'Fallon), or perhaps they needed a larger tract of land than was available in the City (GM and Monsanto). If the difference between success and failure of a business is the 1% earnings tax, it is probably not a very viable business. And the far lower property costs and rents in the City often compensates for the cost of the earnings tax. While some businesses use the earnings tax as an excuse to relocate, the real reasons are usually something else.
I suppose it's easy to say that if the City loses one-third of its revenue then City leaders will simply have to make “hard choices.” That's just an easy thing to say, but in this case almost impossible to do. The City has been making hard budget choices for many years as tax revenues have declined. At some point, essential public services will be crippled, which would certainly be the case if the earnings tax is repealed. That is certainly not a recipe for economic growth and prosperity.
“Yes, the City is the only entity in our region imposing a sales tax,” No, it's the only city that imposes an EARNINGS tax.
“So you really think the City of Ladue provides regional functions?” No, but like many suburban “cities”, they have very little retail property and no insustrial property. As you assume for city residents, there is a limit to how high they can raise their property taxes, and an earnings tax is a logical, albeit remote, option to look at for a new source of revenue. Nothing I've read or heard says anything that addresses any sort of reciprocal arrangements. I can only go on the current arrangement , where both residents and nonresidents are expected to pay the same rates. The only “break' I see happening now is that the city doesn't try and double tax people who both live and work in the city.
“The fact is that we consume public services in a variety of places and it is probably more reasonable to align our tax payments with the place where we get services.” I agree completely. Right now, I live in the City and work two jobs, one in Lemay and one in Kirkwood. I don't have any kids, so I don't, haven't and never will “use” any local public schools. Over the course of the week, I'm “protected” by the City's police and fire services, the county police and Mehlville Fire Department, and by the Kirkwood, Webster Groves and Shrewsbury police and fire departments. I'd argue that both places of employment see a lot more of their respective public safety agencies than I'll ever see of the city's resources. This would be at odds with your assertion that “if you work outside of the City and are “away all day,” you're still consuming the most costly services at home.”
I do like your idea of a regional earnings tax, but I wouldn't bet on its adoption. Much like some of the arguments aginst merging the city and county, St. Louis' large number of lower-income residents will be framed as the city getting a free ride on the back of other, more-wealthy, areas.
Finally, you assert that some people assume that “City leaders will simply have to make 'hard choices.' That's just an easy thing to say, but in this case almost impossible to do. The City has been making hard budget choices for many years as tax revenues have declined.” That is exactly the concern I have, but from a different perspective. One, the real issue is declining revenues, not the proportional distribution. And two, saying that any cuts would be “almost impossible to do. . . . essential public services will be crippled” is part of the mindset that drives people like Rex crazy. Despite the assertions of their vocal constituents, not every public service is “essential”, especially in its entirety. As Metro's recent struggles illustrated, significant cuts are both possible and, when done correctly, result in relatively few direct impacts. Other examples include East St. Louis, the state of Illinois, the St. Louis Public School System and Colordo Springs (http://www.governing.com/topics/mgmt/Colorado-Springs-DIY-government.html) – nobody lkikes making cuts, but if the money isn't there, guess what? Cuts happen! Whether or not they're “crippling” is a separate discussion, and likely depends on one's own perspective.
So I guess “Rex” gets to figure all this out for us. Interesting.
No, the voters will. Rex has framed the discussion, but it will be up to each voter to decide if they're satisfied with the status quo or if they want different answers.
Yes, Rex framed the discussion. With a s**tload of his own money. Being somewhat disingenuous there, Mr. Z. And he will continue to frame it with even more money during the run-up to the election. He has remained silent on what alternatives STL and KC have if the earnings tax is eliminated. My guess is he's a Grover Norquist “drown the guv” acolyte. Thanks, Rex. So, I guess the next stop is to eliminate prop taxes in all of the other munis? No more public schools? Fire protection? Police? Waste and refuse hauling? Inspection of new and rehabbed construction? The list is long. These things were collectivized for a reason. And Rex has offered no answers. Coward. Create problems, but offer no solutions. Typical.
Hey, I agree that Rex is an ideological s**t disturber with deep pockets. But he's not the only well-funded entity or individual out there with an agenda or an axe to grind. The problem for St Louis and KC is that a) he's tapped into the resentment that many suburbanites have in funding city services in addition to those in their suburban enclaves, b) even our mayor has concerns about the earnings tax, and c) there is no organized or rational opposition to Prop A other than “we'll be screwed if this passes, so vote against it”!
My prediction is that Prop A will pass overwhelmingly. Both rural and suburban areas tend to be anti-tax, anti-government and more than willing to stick it to the “scary” urban core. The focus now, and even more after the election, should not be in finger pointing, but in justifying to CITY voters why the earnings tax should remain as such a large part of the city's budget. But between the brand new $132 a year trash fee and the April 15th tax deadline, a May election could prove to be problematic.
In the 5 years I've lived in the city, I've seen our total sales taxes go up by more than 10% (8% to 9% on retail, 9% to 10% on restaurant meals) plus the trash fee. Combined, that's an increase of probably $20 – $25 a month, not that much less than what I pay in earnings taxes. Taxpayers are simply getting tapped out. Government spending on autopilot is not a good thing – just see Bell, CA, for an extreme example. And if you can't justify to the local voters why a local tax is a good thing, then there probably is a good reason for that tax to go away!
Why do you think there is no organized opposition to Prop A? Washington University has donated $5,000 to defeat the measure, Downtown Partnership and RCGA are opposed, Comptroller Darlene Green has come out against it, the Workers Rights Board is organized against it, the Metropolitan Churches United is organizing a large number of churches (thousands of citizens) against the measure, the St. Vincent DePaul Society is against it, protests are being planned, there are phone banks open multiple times per week leading up to the election, United for Missouri's Priorities is organized against it, Kansas City is SUING the state of Missouri over the measure!
It would create a 32 percent shortfall in the St. Louis budget, $141 million dollars
There's nothing in place to make up the shortfall (could triple local sales tax from 1.4 to 5.3 percent in addition to state sales tax of 4.225 percent (for a total of 9.525 percent), OR property tax would need to go up nearly 400 percent to fill the gap.
People who don't live in the city but work here use public services! They still leave their trash here. They still need fire and police protection. They still use our streets, traffic signals, snow removal, park maintenance…
If this measure passes, the city will have to PAY to deal with the issue on the ballot every five years. That's partly why KC is suing.
$5,000 does not a campaign make, and I have seen no advertising, to date. Wonks like us know the issues and the impacts. It's the uneducated voter, the ones that vaguely pay attention to TV ads, that will really decide the issue, and cutting taxes is a pretty powerful message. I'm not even that worried about how the vote will go here and in KC. What I am conerned about is outstate, where Rex will be spending his money, in an apparent opposition vaccuum.
Clayton and Earth City service to daytime employees, yet they don't have an earnings tax. I really hate that argument in a region that is highly mobile and only means that businesses and people will only move out of the city. Oh wait a minute, downtown St. Louis has been employers for decades.
As far as events, have you ever look at you actually pay for the ticket. Their is plenty of tax revenue paid and generated by event goes. But if you look closer, you might realize that it was city aldermen who decided to use scottrade event taxes for rebuilding the Kiel not event goers.
Maybe we should look at Houston, Dallas, Denver, Twin Cities. I believe those cities have thrived without an earnings tax.
It is interesting that St. Louis, Kansas City, and correct me if I am wrong, Wilmington, Delaware (1.25% tax rate) are the only major cities in the nation that have this type of earnings tax. There are many other cities that have earnings taxes, but do not tax commuters at the same level as residents. Many cities tax commuters at a lesser rate than residents or earnings taxes are credited to the city of residence, not the city where the individual is employed.
I am well aware that St. Louis collects 1/3 of its income from this tax. However, one should ask, why is St. Louis only one of three major cities in the nation with this type of taxation? Are we doing something right that no one else understands?
At the minimum, we should be considering adopting a policy that taxes commuters at a lower rate than residents. My personal opinion is that commuters should not be subsidizing the services that residents receive.
A few cities have the same set-up and many more have the over-all earnings tax; Philly is one. But I agree, maybe taxing outside-of-city commuters at a bit lower rate would be a welcome idea, just as other cities do. This would NOT satisy Rex though, and still no new ideas of how we would replace 1/3 of the City revenue! NO on A!
typo='satisfy'
Philadelphia is one of those cities that has a two tiered system for residents and commuters. Non residents pay a little over .4% less than residents. My initial point still stands though, that St. Louis stands alone with KC and Wilmington, Delaware as the only major cities in the US with our system of taxation.
Denver imposes an earnings tax, but it's a flat monthly fee, not a percentage of income, so you're not penalized for being a high earner. This may actually be a better solution for our situation here. The top earners / business owners are the ones that both see the big number personally AND have the ability to influence where facilities are located. Plus, the top earners are typically among the lower range of consumers of government services – they're not the ones that are uninsured, unemployed and requiring police intervention on a regular basis!
Part of the problem is this is not tied to an alternative idea. If Rex really cared about the city he could have had one proposal that both eliminated the earnings tax and replaced it with something else. Depending on what that something is, I might consider voting for it. But asking me to eliminate one third of the city budget during a recession and then not telling me how you would replace it is a terrible idea. Will the services just be cut? Will I face higher property taxes? Will the sales tax go up? Rex has not answered any of these questions, and as an older gentlemen, frankly probably will not live long enough to see the consequences of actions in full effect. I tend to vote no against ideologues and this is certainly one of them. NO ON A.
The underlying issue is that the city has significant unfunded pension liabilities, due to more than a decade of underfunding its pension promises. We're now seeing flat revenues and increasing pension costs, as more employees retire and health costs continue to increase unchecked. We can cut services signifcantly, and even raise taxes, yet we will still face these pension liabilities, unless there is a way to either restructure them or to significantly increase revenues. If the city is bankrupted because of the fallout from Prop A, then that may be one “answer”, although a bunch of retirees would likely be left out in the cold.
A better answer would be addressing why businesses are choosing Clayton, Chesterfield or St. Chuck over the city. It's certainly not land costs or infrastructure – you can build in the city, affordably, if you want. In an ideal world, we'd be growing our employment base in the city at a 5%-8% annual rate. We're not. We're shedding jobs, AND THE TAXES THEY GENERATE, yet we're trying to maintain service and staffing levels, as well as existing budgets. Rex may be an ideologue, but he's tapped into the frustration many people are feeling toward government today, that we've seen significant negative impacts in the private sector, while the government seems incapable of scaling back in a similar manner, be it in overall headcount or pension costs.
Why does Rex have to answer these questions? You didn't elect him to any city seat and he only gets one vote in November.
Once again, blaming this guy is getting old. Quite Frankly, I gave Slay credit for understanding the issue, what the November vote means, and why it is a vote by city residents in April that really matters. Simply put, city residents will have to decide to keep the current tax structure or force a radical change upon itself.
JZ71,
Regarding why Mastercard moved to Wentzville, not the City of St. Louis. Mastercard moved from Maryland Heights, and Maryland Heights has no earnings tax. You can't list a lot of businesses that did not locate in the city, and assume it has anything to do with the earnings tax. If it were all about the earnings tax, then Mastercard would have no reason to leave Maryland Heights. Maybe it was the big TIF they got for moving to Wentzville.
It's like trying to prove a negative – how many businesses choose to locate in the city because it has an earnings tax? None! They choose to locate because of low rents, location, an urban environment, proximity to customers and/or suppliers, and because it's a good market for them. Would more make that decision if the earnings tax went away? Probably. But that would be offset by increases in other taxes and fees, along with the “normal suspects”, crime, schools and racism.
Mastercard's big TIF was certainly a big incentive, but the real question is if the city was even under consideration?! If not, why not? If so, why did we lose out? Earnings tax? A not-big-enough TIF? Perception of crime? Reality of crime? No site large enough? Fear of dealing with city buracracy? My guess would be no one issue, but a combination of all of them.
There are rust belt cities that have reinvented themselves (Chicago, Pittsburgh, Louisville), there are smaller cities that have attracted significant growth (Nashville, Charlotte, Orlando, Austin, Boise) and there are cities that have stagnated and whithered (Detroit, Buffalo, Cleveland). We can either reinvent ourselves or we can continue to do things they way we have so “successfully” for the past fifty years.
Got a point on Mastercard. However, another way to frame it is the fact that the city has been handing out tax abatements for every significant employer looking to move and every major employer who has come into the city lately. The point being, earnings tax is part of the decision and the decision being made includes a tax abatement. In other words, most the jobs that have come back to downtown don't have to pay earnings tax.
Eliminating the Earnings Tax in KC and St Louis will increase sales and property taxes or eliminate public safety services like police, fire, emergency services, public safety, health centers, lights, road repair, etc. This in a bad move not only for our urban areas but for all whole state as KC and St Louis are the largest “economic engines” in Missouri. REJECT Prop A statewide!
IF it were to pass, an alternative would have ten years to be found. That seems like enough time to develop a consensus as the what it should be replaced with.
related coverage: http://www.governing.com/news/politics/Local-Property-Tax-Caps-Have-Big-Consequences.html
I don't think you will get very far in your argument considering that next door in St. Louis county you got twice the population and a bigger economy without an earnings tax to be found. Lets not forget that the economic engine of St. Louis encompasses four counties and a population bigger then the city itself.