Description of the issue:
St. Louis’ earnings tax is a one percent tax levied on the earnings of those who live or work within city limits as well as on the profits of city businesses. At $141 million, it is the city’s largest source of revenue, accounting for a third of the city’s general fund. This is equivalent to the budgets for the police and fire departments, trash pickup, street maintenance, and parks upkeep.
In November 2010, Missouri voters passed the state-wide ballot initiative Proposition A, which prohibits the use of an earnings tax in any municipality that does not already have one, and that requires the cities of St. Louis and Kansas City to hold elections every five years to keep the earnings taxes they have in place. The first such municipal election will take place in April 2011. In St. Louis, the ballot proposal is called “Proposition E.”
Proponents of eliminating the earnings tax argue that the tax is a burden on businesses and employees, and serves as a disincentive for investment in the two cities. Proponents of keeping the earnings tax argue that the cuts in services that would result from eliminating the earnings tax would hurt the city’s ability to attract and retain businesses and to serve city residents.
What’s going on now?
Proposition E will be on the ballot on April 5, and will ask voters if the City should retain the earnings tax. There might be some confusion arising from differences in ballot wording between Proposition A last November, and Proposition E this coming April. In November’s Prop A, if you wanted to keep the earnings tax, you needed to vote “no.” By contrast, this coming April, in order to keep the earnings tax in place you will need to vote “yes.”
Position of FOCUS St. Louis:
The Board of Directors of FOCUS St. Louis passed the following resolution in March 2010:
The FOCUS St. Louis Board of Directors opposes efforts to eliminate the City Earnings Tax until there is a viable alternative.
The other two major sources of revenue are property taxes and sales taxes. The problem with eliminating the earnings tax is that, to replace the lost revenue, these taxes would have to rise to levels higher than is considered feasible.
FOCUS St. Louis is open to dialogue and discussions about the municipal services provided by the City of St. Louis, and how best to pay for those services. However, until such time as viable alternatives are available, the Board of Directors feels that the Earnings Tax should not be eliminated.
Resources:
There was a debate carried out last fall between Joseph Haslag, chief economist for the Show-Me Institute, and Jack Strauss and Lisa Gladson, economics professors at Saint Louis University. We provide links to (a) the original paper by Haslag, (b) the response to Haslag’s paper by the SLU economists, and (c) Haslag’s response to the SLU economists.
“How an Earnings Tax Harms Cities Like Saint Louis and Kansas City”
By Joseph Haslag: chief economist at the Show-Me Institute
“Don't blame the earnings tax,” response to Haslag’s paper
By Jack Strauss and Lisa Gladson: Both are professors of economics at SLU, and Dr. Strauss also serves as the director of the Simon Center for Regional Forecasting at SLU.
“SLU Economics Professors Misstate Findings of Earnings Tax Paper” Haslag’s response to Gladson and Strauss
By Joseph Haslag: chief economist at the Show-Me Institute
Campaign websites:
A "yes" vote on Proposition E will maintain the existing earnings tax, while a "no" vote will eliminate the earnings tax in the City of St. Louis.
There is no similar website for opponents of Proposition E.