Prop A would limit earnings tax

Big cities would be required to vote on ‘earnings tax,’ which would be eliminated outstate

Only Missouri’s two largest cities have an “earnings tax,” a 1 percent additional tax on the income of people who live in, or work in, St. Louis and Kansas City.

Both are charter cities, but neither charter requires voters to approve its continuation.

Proposition A, a statewide initiative that gathered enough signatures to be placed on next Tuesday’s ballot, would have all Missouri voters tell the two big cities they must have votes every five years to continue the earnings tax, or cancel it over a 10-year period.

“If they want to get rid of the earnings tax and phase it out, that’s going to be good for economic development, long term,” said Jefferson City lawyer Marc Ellinger, a spokesman for the campaign group “Let Voters Decide,” which helped circulate the petitions and wants voters to say ‘yes’ to their plan.

He said businesses in St. Louis and Kansas City are choosing to leave because of the earnings tax.

“They can go across the street into St. Louis County or Jackson County, or they can go across the state line into Illinois or Kansas — and they’re doing it in droves,” he said.

If Proposition A is passed, it requires those cities’ voters to have an up-or-down vote on continuing the earnings tax next spring.

If the voters reject continuing the earnings tax, it must be phased out — and the language of Proposition A prohibits any effort to reverse the process.

In fact, if passed, Proposition A also would prevent any outstate community even from considering such a tax.

“We certainly think it’s important that, across the state of Missouri, other communities don’t have to suffer under a third income tax and have the same negative results occur to them,” Ellinger said.

St. Joseph is the only other Missouri city that has legal authority to impose such a tax — and only if its residents approve the idea.

Any other community in the state first would have to get lawmakers to allow them to have a local vote, and then — critics note — the 1980, voterapproved Hancock Amendment to Missouri’s Constitution already requires voters to approve tax increases.

Mark Jones, a spokesman for the Coalition “United for Missouri’s Priorities,” told last week’s issues forum at Jefferson City’s City Hall: “Proposition A ... lets people who don’t live here make decisions about how we run our city.”

He wants voters to reject the proposal.

“Right now, you have control over the kind of taxes that are imposed in your city, through your elected representatives, through the ballot or through the initiative petition process on the local level,” he explained.

“What Proposition A does is say, ‘You are not smart enough to make a decision about your local taxes’ — but the people in Columbia, Mo., are. The people in Milan, Mo., are. ... And we fundamentally disagree with that approach.”

Leaders in St. Louis and Kansas City say the earnings tax mainly is used for police and fire protection and emergency services like ambulances, which benefit visitors as well as the people who live there.

Even requiring a phase-out of the tax could create significant problems, they say.

Jones cited another problem: “Proposition A is supported essentially by one human being, a billionaire by the name of Rex Sinquefield.”

State Ethics Commission reports show that Sinquefield, who is a retired investments adviser who now has homes near Folk in Osage County and in the St. Louis area, has contributed $11.218 million to the Let Voters Decide campaign. The latest campaign finance report shows he’s given the campaign all but $92,000 of the group’s total receipts.

Ellinger said: “I don’t think that makes any difference to voters.

“Ultimately, Mr. Sinquefield gets one vote — just as there’s 2 million voters in the state, give or take, who will vote on Nov. 2, and each of them will get one vote.”

Jones said: “Proposition A is opposed by one of the most broad coalitions you could hope for.

“Wherever you fall on the spectrum of being pro-labor or pro-business, it’s rare, I think to see both of those groups come into a room and say that something is ‘bad.’ We should pay attention.”

The opponents have raised more than $660,820 from about 40 groups and a few individuals.

The largest donation, $200,000, came from the Washington, D.C.-based National Education Association.

Another $205,000 came from three groups, combined — the Missouri Federation of Teachers, the Civic Council of Greater Kansas City and the Burns and McDonnell engineering firm of Kansas City.

Facts on Proposition A

By The Associated Press

PROP A: Missourians will vote on a measure to forbid earnings taxes in all communities except the two, Kansas City and St. Louis, which already have them. In those two cities, passage of Proposition A would require them to hold elections every five years asking local voters if they want to keep the tax.

AT STAKE: For most communities, Prop A passage would simply forbid their local governments from implementing an earnings tax. The state’s two largest cities stand to lose hundreds of millions of dollars if local voters choose to repeal the taxes in future elections. Kansas City brings in about $200 million per year from the tax, or 39 percent of its general fund budget, while St. Louis gets about $140 million, roughly one-third of its general fund.

CRITICS: Business and labor groups in Kansas City are opposed to the measure because it puts a major city funding source in jeopardy, should voters subsequently choose to repeal the tax. Also among opponents is the Missouri Municipal League, which represents towns across the state, because passage of Prop A would remove a potential tool for cities to use to balance their budgets.

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