@BlogKCThe conservative St. Louis think tank The Show-Me Institute has released an economic study (PDF) proposing the elimination of KCMO’s earnings tax and replacing it with a land tax. This essentially take the current property tax and convert into a two-tiered system – a higher tax on the value of the land and a lower tax on the value of improvements (e.g. buildings).
One of Haslag’s assumptions is that the earnings tax is driving away businesses and residents, hurting the city’s economy. However that doesn’t quite jibe with the fact that the Northland is the fastest growing part of the metro area, even though most of it is within the KCMO city limits. For years KCMO has been building more new housing than the next two or three suburbs combined. In 2007 Clay and Platte Counties are anticipated to pass Johnson County in rankings of new home construction. The earnings tax doesn’t seem to be stopping the Northland’s mass migration of suburbanites into KCMO.
Another component of the earnings tax is that it is a way for suburbanites to help pay for city services used by the whole region – things like the zoo, museums, roads, etc. Suburbanites’ contribution through the earnings tax helps hold down property taxes for city residents. The proposal does nothing to address this issue of regional equity.
Finally, this whole idea require a change to the Missouri Constitution, which doesn’t currently allow for two-tiered property taxes.
Just kill the earnings tax and rely on taxable income elasticity; any loss would shortly be made up by the resulting economic growth.
What’s the worst that could happen with that 1%, a complete collapse of basic services resulting in a city full of pothole filled streets and a barely functioning water/sewer system? Oh wait….
It’s an interesting idea, until you think about the property tax abatements some of the downtown development projects are receiving. Under this plan, these properties would be contributing nothing — in terms of property and earnings taxes — to the city coffers for at least a decade, and close to nothing for about 15 years after that. That leaves city sales taxes, but a chunk of that revenue is devoted to paying off TIF bonds …
The study is flawed. It does not include the Kansas City portions of Clay, Platte and Cass in the city profile. It then uses the growth in those areas against the city. The study then uses a town of 150,000 with a metropolitan area of 400,000 as the model that Kansas City should follow.
The study further shows that Kansas City has not lost jobs or residents. Yes, our economy has not grown as fast as our suburbs, but what American city’s has.
The water and sewer system in KC is not “barely functioning”. Schools…maybe.
People are moving to the northland because it’s affordable, close to the city, and respectable public schools.
why would you want to tax building improvements. that makes no sense to me…