Those Earnings Tax Petitions

Several petitions regarding the earnings taxes collected by St. Louis and Kansas City have been approved by the Missouri Secretary of State for circulation. Sponsors now have several months to collect signatures from across the state in order to place at least one of them on the ballot.

I think we have to be very vigilant. If the wrong petition makes it to the ballot and passes in a well-funded campaign of half-truths, the City of St. Louis and Kansas City will be insolvent or unable to deliver essential services to residents and businesses.

St. Louis, for one, has made great progress in the last decade. Most neighborhoods are great places to live. Businesses are expanding and signing new leases. We have redeveloped and revitalized some important buildings and filled plenty of vacant spaces. Downtown is coming back as both an employment center and as a residential neighborhood. People are moving back into the City. A lot of great things are happening.

Some of that development has come at a cost: tax incentives, tax credits, loans, and grants. That isn't ideal, but we (and all other cities) do it because it works ' and because the development wouldn't happen, or happen as quickly, without it. We would love to get the point that we would not have to do that anymore.

The earnings tax is like that. Most older American cities have taxes that share the higher costs of being the urban core with the people who live around the cities and use their services. By comparison with these cities, St. Louis and Kansas City levy earnings taxes somewhere in the middle of the range.

Some people argue that earnings tax puts the City at a competitive disadvantage to other places, discouraging some new businesses and new residents. It is, however, a third of our entire budget (and more than that, I believe, of Kansas City's budget). For purposes of measurement, the earnings tax in St. Louis generates what the police department costs. Losing the revenue before it is replaced it is NOT an option.

There are some people who are against all the petitions because they fear change. There are some people who support all of the petitions because they hate and distrust government. I agree that the earnings tax is a disincentive for some residents and businesses, but I strongly believe that there would have to be major changes in the City and in the region first to continue without it.

So ... if the proposal facing voters called for eliminating the City earnings tax in ten years with a phase out starting in two years, I would oppose it. If it allowed the voters of the City to decide the matter, and if voters subsequently decided they wanted to replace the tax with something else, and if it gave us a decade to come up with a solution, I would support it.

Think through this. How could the City replace revenue lost by the earnings tax? If that had to happen over five or fewer years, we couldn't. Period. That's why I would oppose such a proposal. If the time allowed was ten years, we could use that time to examine the region's tax and fee structure and devise a way that would allow us to raise enough revenue to provide needed City services in the best business climate possible. However, I can tell you that I would not support using any revenue stream — such as sharply increased residential property taxes — that created an even greater disincentive to City residents and businesses than the earnings tax does.

We could also use that time to eliminate redundancies in City government and in the region that waste money, though we could not just cut our way to eliminate the need for a full third of the budget and still provide municipal services.

The Police Department is one place we could look for savings, if the General Assembly gave the City local control. Right now, between the City and the Police Department, there are two sets of everything. Two sets of lawyers, two sets of communication teams, two sets human resources people. Merging the civilian functions of the police department into City government could save taxpayers millions of dollars.

Likewise, on a regional basis, if the City (which is required by law to provide services as it were also a county) were to enter St. Louis County as a municipality ' like Chicago is part of Cook County ' both the City and the County could eliminate redundancies that would save taxpayers money. If the General Assembly and voters approved, we could do that.

The bottom line is this: If we do not improve as a city, and if we do not improve as a region, the world will pass us by. We have to eliminate things that hurt our competitiveness, and do things that make us more competitive. That's why we have got to start facing reality on a number of issues, from taxes, to redundant government, to the structure of local government.