Dec

30

Earnings Tax, Behind the Music

December 30, 2009 | 7 Comments

Update: Our numbers have been tweaked thanks to advice from a commenter…

So the City’s earnings tax is back in the news again.  The libertarian Show-Me Institute is mounting another effort to achieve their primary goal, elimination of the city income taxes in Kansas City and St. Louis.  Those taxes make up about 40% of each city’s General Fund, so if we don’t want to give up police/fire protection or trash collection, other taxes will have to be raised.  So far the news media hasn’t talked about this, but today we will.

In short, the average Kansas Citian could pay $1200 more if the earnings tax was eliminated and other taxes raised to compensate.

Kansas City estimates that property taxes would have to rise 500% to make up the difference (State Auditor Fiscal Note, PDF).  With a City share of $350 on the average property tax bill, that’s an $1800 increase, more than doubling your total property tax bill.  The average household income is $60,000, so that property tax bill would only be offset by $600 in earnings tax relief.

Would you trade a $600 earnings tax bill for a doubled property tax bill?

The other interesting bit of information that the local media neglect to mention is the money behind the Show-Me Institute.  Rex Sinquefield is a St. Louis businessman who might be the state’s most generous political patron.  He has donated hundreds of thousands of dollars to St. Louis politicians, school voucher campaigns, and anti-tax groups.

The Institute’s chairman is R. Crosby Kemper III, of the UMB Bank branch of the Kemper family.  In addition to being the CEO of the KC Public Library, Crosby is a former executive of UMB, which pays substantial earnings tax to both Kansas City and St. Louis.  The really cool thing about Crosby Kemper is that he doesn’t live in Kansas City, not even Mission Hills.  Crosby commutes to the City from Lawrence, KS, so he would be freed of the earnings tax yet immune the increased property tax.  Convenient!

Categories: Earnings Tax, Politics


Comments

7 Comments so far

  1. CV on December 30, 2009 6:03 pm

    I’d be more than happy to abolish the E-Tax and let people in K.C. pay their own way just like everyone else in the state does who don’t happen to live in K.C. or St. Louis.

    You gotta ask yourself why every single municipal entity in the state gets by without having an tax on earnings except those 2 cities.

    The E-Tax is just an excuse to waste our money without any repercussions or due diligence in the way they do spend it.

  2. Are wind power's critics blowing hot air? – DailyFinance | Lewis County NY Real Estate on December 30, 2009 7:18 pm

    [...] Earnings Tax, Behind the Music : BlogKC [...]

  3. gsp on December 30, 2009 9:47 pm

    maybe because they’re the two biggest cities in the state

  4. The Tax Foundation – New Jersey and New York Counties Rank Highest … | Allegany County NY Real Estate on December 31, 2009 4:59 am

    [...] Earnings Tax, Behind the Music : BlogKC [...]

  5. AJ on December 31, 2009 8:43 am

    Kemper hasn’t worked for UMB in years and I doubt he’s lobbying for UMB on this one. I think he has a general notion that the earnings tax is limiting our ability to attract good employees and in turn, good employers. Not that I totally agree with that notion, but all options should be on the table at this point. We are losing a lot of people to the KS side and as a Missourian it sucks to work on Kansas side of the State Line and watch these revenues get wasted on bad debt. Besides, I don’t think city services could get much worse at this point.

  6. Thomas on December 31, 2009 10:07 am

    The earnings tax is a tax on jobs. Should we be surprised that since the adoption of the earnings tax we’ve seen much stronger job growth outside of KCMO than inside it? No, we shouldn’t be surprised.

    The actual effects of the change aren’t as you suggest. Consider a homeowner with a $100,000 house in KCMO, Jackson County, Grandview school district. That homeowner pays about the $1600 average property tax amount. But–and this is important–only about $275 of that is to KCMO. So even assuming that a 500% increase would be required, it wouldn’t have the effects you suggest.

  7. Casey on January 2, 2010 11:30 am

    In the years since WWII growth has been in the suburbs not only because of the construction of the highways but also because of Federal housing policies that give preference to new properties on the edge over renovating in the middle. The first half of the post war period had extensive systematic discrimination in the real-estate industry, a practice which affected Kansas City more than Johnson County for obvious reasons.

    Even though these discriminatory practices have been outlawed for decades, minority neighborhoods still lack investment because of a little game the banking and insurance industries play. The banks don’t like to loan in certain communities because the borrowers have trouble getting insurance. Insurers don’t like to insure in those areas because borrowers can’t get loans.

    We can also add to these factors that out here on the planes we have ridiculous amounts of land, and greenfields seem to be the easiest land to develop.

    In short, I’d like all of these factors to be accounted for in Kansas City’s economic history before I make decisions or judgments about the earnings tax.

Name (required)

Email (required)

Website

Speak your mind