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Removing earning tax only makes sense if you can replace it
(by Jeff Fister - March 02, 2010)
There are some pieces of mail that get your attention. Or in my case, my wife’s attention.
“You have a court summons,” my wife said when she called me in the middle of the day. “Something about unpaid taxes.”
My wife and I file jointly, so the letter was addressed to both of us. “Uh-oh,” I thought.
When I got home I looked at the envelope. Inside was a red-ink letter with words like “must appear” and “bench warrant” from Gregory Francis Xavier Daly’s office, the city tax collector whose name I’d been writing checks to for 20 years. Also enclosed was a summons from the city circuit court. Daly’s letter basically said I had to go directly to court…. do not pass “Go,” do not collect $200.
I shrugged it off. “I’ll call my accountant,” I said. My wife wasn’t so sure.
Long story short, it turned out I had received some income in 2008 separate from my payroll and the person paying me had neglected to withhold earnings tax. And I had neglected to include it. As all people who live and/or work in the city know, the city charges 1 percent of your earnings for the privilege of living and/or working here. A visit to Mr. Daly’s office, and $140 later, all was resolved. No trip to the court. Wife relieved.
That same day I had heard a news report about an effort to repeal the city earnings tax.
“Uh-oh,” I thought again. I’ve heard this before.
Previous St. Louis mayors, including Vince Schoemehl and Clarence Harmon, have floated the idea, usually under pressure from business leaders, but the trial balloons were quickly popped and the idea abandoned.
And for a simple reason: the earnings tax generates 31 percent of the city’s revenue. Repealing that would be like cutting off the arms of an already-gasping city budget.
The idea does have some merit… proponents like the Show-Me Institute claim that the earnings tax makes employers flee the city and causes new employers not to consider moving to St. Louis. The Show-Me Institute study stated that eliminating the earnings tax would create 6,500 new jobs in Missouri in the short run, along with nearly $157 million in additional tax revenue. The study points out that other cities with earnings tax, like Cincinnati and Philadelphia, have lost employment to neighboring states. Supporters hope to have enough petitions signed to have the measure put on the November state ballot.
This is fine. Who doesn’t want to add employment and increase tax revenue? The problem is the immediate impact on the city.
Predictably, city police, firefighters and a number of aldermen are against the move.
I heard our current mayor, Francis Slay, interviewed on KWMU radio last week by Don Marsh. While Slay said the earnings tax proposal had some merit, he realized what mayors before him did: without something ready to replace that revenue, it would be a potential disaster for the city.
Slay suggested the city and St. Louis County revisit the idea of a merger. St. Louis city elected to separate from the county in 1876, ironically because the city thought the then-fledgling county would drain resources from a booming metro area.
Now the roles are almost reversed, and many think a merger would increase efficiency, reduce duplication of services and spread the tax base over a greater area. After all, what’s the point of Clayton, University City, Richmond Heights, etc., all having their own fire departments? This is a view, incidentally, also endorsed by the Show-Me Institute.
Meanwhile, I won’t mind paying the earnings tax. As an employer, I think it’s a fair enough way to help pay for city services. And as a resident, I shudder to think how eliminating the earnings tax might affect my property taxes.
I just hope to stay out of court.
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