Proposition A: An irresponsible choice
On the ballot this November is the Missouri Earnings Tax Initiative, also known as Proposition A. You may have seen some of their advertisements on Hulu. The proposition calls for the enactment of a 2011 referendum that would require a vote on the one percent earnings tax in St. Louis and Kansas City. If voters decide to repeal the earnings tax in these cities, it will be phased out over the next 10 years and not be allowed to return. If, on the other hand, the measure in 2011 fails, there will be a vote every five years to determine whether or not the earnings tax should remain, and other towns and cities would never be allowed to propose an earnings tax.
The earnings tax accounts for approximately one-third ($141 million) of St. Louis’ general fund budget, which is notorious for being in the red. While no official proposals have been made on how to replace the lost revenue, some have suggested imposing taxes on normally tax-exempt institutions, such as Washington University.
There is also a constitutional amendment on the ballot to ban future imposition of transfer taxes, which are taxes paid on the sale or purchase of real estate. This amendment comes from a similar ideology and has similar consequences.
While it may sound like a good idea to cut taxes, or at least let the people vote on them, there is currently no plan to replace the lost funding for the city of St. Louis, which would be left without a large portion of its tax revenue for the immediate future. This imbalance could lead to huge spending cuts or large increases in property and sales taxes.
We believe that the politicians behind this initiative have irresponsibly failed to ensure that the governments of St. Louis and Kansas City will not have to remove essential civic services. The Proposition A campaign, which enjoys $11 million in donations from billionaire Rex Sinquefeld and is heavily supported by the Tea Party, also does not talk about alternatives for the tax and instead highlights its campaign with the slogan “More tax cuts equals prosperity.”
Moreover, many cities around the country have earnings taxes similar to those of St. Louis and Kansas City. We feel that a claim that this is an uncommon occurrence ignores mountains of evidence in the rest of the country. California presents an example of the potentially stark consequences of passing Proposition A: its state legislature is unable to levy taxes, and as a result its government is embroiled in a perennial budget nightmare.
The problem with Proposition A is that a majority of voters are unaware of its potential consequences. Voters can be easily swayed by promises of lower taxes, even when lowering those taxes might have disastrous consequences. And permanently eliminating the earnings tax might have serious repercussions beyond the immediate fiscal future.
In the future, both Kansas City and St. Louis may need to raise revenue quickly to meet expected future budget shortfalls, but the referendum posed by Proposition A may give these cities and other towns in Missouri no choice in funding services—ironic for a campaign that attempts to portray the proposition as a way to give citizens more choices.
And, closer to campus, the proposition has the potential to task tax-exempt institutions, such as Wash. U., with paying the price of budget shortfalls. Though Wash. U. presents a heavily-concentrated amount of resources and debate surrounding its contributions to St. Louis is larger than Tuesday’s ballot initative, there is no doubt that such measures may drastically alter the University’s ability to contribute to both the region and its students.