Ballot text
Shall Missouri law be amended to repeal the authority of certain cities to use earnings taxes to fund their budgets, require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 5 years thereafter, require any current earnings tax that is not approved by the voters to be phased out over a period of 10 years and prohibit any city from adding a new earnings tax to fund their budget?

The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenues of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.

What it’s asking
If passed, this proposition—initiated and largely financed by retired investment banker and Tea Party supporter Rex Sinquefield—would set up elections in Kansas City and St. Louis every five years to see if those cities want to eliminate their respective transfer taxes.

In St. Louis, this tax is a one percent earnings tax, levied on salaries, wages, commissions and other compensation. In both cities, income from the tax goes toward general revenue. If the cities’ residents at any point vote to eliminate their earnings taxes, they cannot reimplement them. If they reject the tax, both cities have 10 years to phase these taxes out.

If Proposition A passes, every other city would be prohibited from adopting an earnings tax.

The proposition’s supporters say that the earnings tax has hurt the cities, encouraging businesses to move their productive capacities outside the cities. They claim that eliminating the tax would cause personal income to grow and cause a twofold increase in the number of people working in the city. They are using the argument “Let the voters decide” on whether or not to keep the earnings taxes. (Of course, it’s important to keep in mind that, by barring all future implementation of earnings taxes, the measure doesn’t give voters in any other cities the option to create an earnings tax if they want to.)

Those who oppose the proposition say that the loss of revenue would require cuts in infrastructure, services and safety for both cities. In order to make up for the lost revenue—which accounts for $141 million in St. Louis, about a third of the city’s general budget—both St. Louis and Kansas City would have to balance their budgets using an increase in sales or property tax, potentially slowing down the economy or unfairly targeting homeowners.

Our take
No. Passing Prop. A could put city finances at risk, and it would eliminate voter choice on future earnings taxes.