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

Turning out the lights

When I first moved to St. Louis, I thought that there were a lot of street lights here. After living here for a few years, I’ve come to the conclusion that our high level is a result of a combination of older, dimmer lights simply being replaced with newer, brighter head units and an assumption that brighter street lighting is a deterrent to crime.

I’ve also been exposed to the edges of the “Dark Skies” movement, where people are very concerned about light pollution. Places like the big island of Hawaii and Tempe, Arizona, have enacted strict restrictions on exterior lighting, so people can see the stars at night. Daytona Beach has restrictions along the Atlantic Ocean, to protect the nesting areas of sea turtles. Given the recent economic challenges, Santa Rosa, CA, is eliminating nearly half of their street lights. “The city boasts that it will cut its carbon footprint. What really matters, though, is money.”

The truth, like many things, is probably somewhere in between. For security purposes, you just need to be able to see if someone is lurking or up to no good, you don’t need to be able to do surgery. Brighter is not always better – if you have a “glare bomb” of a gas station, then yes, everyone else around them needs to be incrementally brighter than they would be otherwise, just because of the extreme contrast. At the other extreme, on a clear night with a full moon, in areas without streetlights, even though the actual light level is very low, because it’s not concentrated, both people and things are readily discernible.

Which gets back to St. Louis. We have budget issues and we have crime issues. According to the city’s website, we have more than 80,000 streetlights. We even have a history of being the leaders in the use of electric lighting. The question, now, is whether or not we should maintain the status quo? Or, if we should see is we can save some money without increasing crime rates. The city’s budget includes ±$4.3 million for the Traffic & Lighting Division and its 33 employees, which works out to $67 per light.  If we were safely able to eliminate 10% of our existing streetlights, we’d be able to save more than a half million dollars annually and we’d be reducing our carbon footprint.  It all gets back to perception versus reality.  Are you willing to see reduced street lighting in St. Louis, both to save tax dollars and to be a bit more environmentally conscious?  Or is the pervasive fear of crime, in too many parts of town, enough justification to maintain, or expand, existing lighting levels?

– Jim Zavist

Regional goals/strategies for 2010

Many of us use this time of year develop goals/strategies for ourselves, personally & professionally. I have a number for myself as well as this site.  But I think this would also be good practice for cities & regions.  The following are suggestions I have for the City of St. Louis and the St. Louis region to adopt for this year:

Region as a whole, including all counties & municipalities:

• Rethink land development practices.  Concentrate not on assembling land, but on infilling existing areas at higher densities and at a finer grain & highly connected.
• Rethink funding mechanisms for infrastructure and projects.  Find ways to decrease one municipality trying to steal sales tax dollars or employers from another.
• Work on ways to reduce the total number of units of government including, but not limited to, municipalities, school districts, fire protection districts, etc…
• Create a cooperative agreement among municipalities in the region’s core  (both sides of the river) to work on big picture planning for the older center.  Shared issues such as aging infrastructure, population loss, urban infill, and public transit can bring these cities together to share ideas and to leverage their collective strength.
• Understand that by creating a great region in which to live more people will visit and stay.

St. Louis County:

• Pass the dedicated transit tax in St. Louis County on April 6, 2010. See Greater St. Louis Transit Alliance for more information.

City of St. Louis:

• Establish a forum for citizens to explore changes to the city’s charter. Many ideas exist about the problems and solutions – these need to be discussed.
• Along the same lines work to shift control of the police force from Missouri to our local leaders.
• Drop the idea of rejoining St. Louis County.
• Set up group to begin looking into the long process of changing our outdated zoning code.

There are probably many more items for these lists but the above is a starting point.  Happy New Year!

– Steve Patterson