A state senator wants to eliminate the one-percent earnings taxes paid by those who live or work in Kansas City and St. Louis, but those cities’ leaders say it would hurt vital services.
Senator Kurt Schaefer (R-Columbia) says those taxes are unconstitutional based on a recent U.S. Supreme Court ruling on a case out of Baltimore, Maryland. Attorney Sean Marotta, who argued against Baltimore’s tax, said those in Kansas City and St. Louis are unconstitutional because of a lack of credits offered by Kansas City and St. Louis for taxes paid to other states, and he says if a lawsuit was brought against them they would be stricken down.
On Thursday Marotta told a state senate committee, “Take two taxpayers who are exactly the same. One lives in St. Louis and earns all his income in St. Louis, and there’s another taxpayer who also lives in St. Louis but earns all his money in Illinois. That Illinois worker/taxpayer pays more in taxes for no other reason than because he’s chosen to go across state lines to make his money.”
Marotta said Kansas City offers some credits, but not enough to suit the findings of the Baltimore case.
“Unconstitutionality is like being pregnant. Either you are or you aren’t,” said Marotta.
Kansas City Mayor Sly James told the committee losing that tax would devastate his city’s budget, and said most of the impact would be felt in public safety.
“It’s a bleak future in Kansas City without the earnings tax because any attempt to replace it would require that we increase tax revenues in massive ways,” said James. “We would have to double our sales tax. We would have to triple our property tax,” said James. “Simple analysis of this impact shows that Kansas City would basically let transient service consumers off the hook for paying for the services they use and consume, and instead ask senior citizens and the working poor to make up the difference.”
He said losing the earnings tax would eliminate about 40-percent of the city’s general fund.
“Our city budget is 72-percent consumed with public safety. That means that if we start looking at making cuts that’s the place where it’s going to come,” said James. “810 police officers, 550 fire fighters, and 370 public safety civilian employees would be gone.”
Marotta told the committee the arguments about the impacts of losing such a tax were made in the Baltimore case, “and the court wasn’t moved.”
Schaefer said he proposed the appeal to start a conversation about the potential issue.
“Either there is going to be a resolution between St. Louis, Kansas City, and the State of Missouri on how we go forward in what is best for all three entities, or someone – and it’s going to happen – is going to file a federal lawsuit and they are going to win,” said Schaefer. “When they do that a federal judge is not going to have a protracted negotiation period such as we can do, and I’m not saying that the bill which I have in front of you – which cuts off the earnings tax in 2017 – is the only way to solve this problem … I would call it an attention-getter.”
Kansas City attorneys told lawmakers the taxes are constitutional.
Both cities’ voters will be asked this year whether to renew those taxes. James and St. Louis Mayor Francis Slay told the committee their cities’ voters both overwhelmingly supported renewing their respective taxes the last time each came to a vote.