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The question of earnings taxes

January 3, 2010 Sunday Poll, Taxes 101 Comments
St. Louis City Hall
St. Louis City Hall

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

 

Pro Sports Teams in St. Louis

St. Louis has a long history with professional sports teams, but, except for the Blues and the Cardinals, there’s also been a lot of changes over the years. The Browns, the Hawks and the football Cardinals have all left town. We invested heavily to get the Rams. We were once the epicenter for professional wrestling, and we currently support, among other sports, roller derby (ArchRivalRollerGirls.com).

Supporters of pro sports view them as being critical to a major city’s identity and for attracting new businesses. This is backed up with public investments like those in the Jones Dome, Busch III and Scottrade Center. But there are always groups advocating for more and different. One thing St. Louis lacks, in the traditional sense, is a pro basketball team. The Hawks were here from 1955 to 1968, but they were sold and moved to Atlanta. There are also “newer” pro sports leagues that are growing around the country, in sports that appeal more to the younger generations, sports like soccer and lacrosse.

With some regularity, we’ll see proposals, many times in Illinois, to build a new pro sports facility to support one of these new leagues. The Rams continue to make noises about the need to improve or replace the Jones Dome.  We just had a successful weekend of bike racing and the possibility of bringing the Olympics back to St. Louis is always a remote one.  There are those of us who would like to see a bigger investment in expanding our trail system, and there are others who value motorsports like NHRA and NASCAR.  Heck, there are even people willing to spend money watching monster trucks or lawnmower racing.

This all boils down to priorities.  We can’t be everything to everybody, so choices have to be made.  The Cardinals and the Blues seem to be relatively satisfied, for the time being, which leaves everyone else.  Should we focus our efforts on keeping the Rams or should we try to get an Arena Football team?  Would pro soccer be a better investment than pro lacrosse?  And should St. Louis work to keep any new facility in or near downtown, ar should we let other cities in the region share in both the glory and the headaches any pro team brings?

– Jim Zavist

 

Bill Before Missouri Legislature Could Stall Revitalization Efforts in St. Louis

Tax credits can be an effective tool to accomplish certain goals. For example, the federal mortgage deduction is meant to encourage home ownership.  But in truth the fed is subsidizing home ownership.  Tax credits are a trade off — a credit in exchange for something of value.

But an amendment tacked on to Missouri’s jobs bill (SB45) could severely limit the state’s Historic Preservation Tax Credit that has helped St. Louis, Kansas City and towns throughout Missouri since taking effect on January 1, 1998.  The landscape in Jefferson City is changing daily so I know I don’t have the latest.  But know that the very tax credits which have been a key player in renovation projects downtown and throughout the city, may get limited.  We need this tax credit to continue the redevelopment of historic buildings in St. Louis and in communities across the entire state.

Further reading:

Tax incentives that produce results (jobs, reinvestment in established areas, etc) should be expanded – cut capped.

 

Sales Tax Rates Will Vary

February 6, 2009 Taxes 11 Comments

The rate of 7.25% seems stuck in my head as reasonable.  But recent receipts in the city show a rate of 8.241% on non-food purchases.  Yikes!  Last month I brought stuff at the Ikea store in the Chicago suburb of Bolingbrook which had a rate of 8.5%.  Food purchases have a rate of 5.1409%.  I forget how that came to be — I think it was the elimination (or reduction) of the state portion?  Most of my purchases during the last year have been food and books for school.  But boy those 1/8th of a cent tax increases add up.

We tax ourselves in order to provide services.  These can be everything from public schools to police/fire/ems to public libraries, transit, street lighting, parks and on and on.  Taxes come in many forms depending upon the jurisdiction where you live.

A decade ago I had my luggage stolen from my car the day I was traveling to Seattle.  I arrived in Seattle with the clothes on my back and a magazine purchased in the Minneapolis airport.  The next morning we were driving from Seattle to visit Portland, OR.  Oregon has no sales tax so as I bought clothes (& luggage) to replace those that were stolen the savings added up.  That $24.99 shirt was just $24.99.  That same shirt bought today in St. Louis would cost another $2.50.

As a tourist enjoying tax-free purchases I likely paid more for some items because other taxes, such as property taxes, are often reflected in the final price of the goods & services.The renter doesn’t escape property taxes — part of the rental rate is there to cover those taxes.  The issue of evaluating tax levels from city to city within the same region and state is complicated enough but comparing region to region gets even more complex.  I’m sure somewhere out there I could find a study to show what a family might pay in various taxes in the St. Louis region vs. Dallas vs. San Diego and so on.

Sales taxes just happen to be one we see regularly.  We have the option to order online and potentially avoid paying sales taxes (although not necessarily).  If our online purchases exceed I believe $2,000 annually in Missouri we are supposed to pay use tax on those purchases.  My online purchases never come close to approaching that amount.

But then we go back to figuring in services relative to taxes paid.  Some places have lower tax rates but they also have a reduced level of services.  Thus it comes back to the question if you are pleased with the level of services provided by your government based on your total annual tax bill?  As consumers cut back on spending and shift more purchases away from retailers in their communities to online stores local & state government budgets are going to feel the pinch.  With less money that means less services.

Share your views below on taxes.

 

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