The 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.