from St. Louis on the Air
4:57 pm
Thu March 31, 2011

To tax or not to tax? A discussion of Proposition E in St. Louis

Next Tuesday, St. Louis City voters will vote on Proposition E.  If the proposition passes, the city will retain its 1 percent earnings tax.  If the proposition fails, the tax will be phased out over the next ten years.  Supporters and critics of the earnings tax disagree on many things, including how the tax affects the economic vitality of the city and how prominently the tax figures into people’s decisions to live or work in St. Louis.  But many agree on this: no replacement for the earnings tax is in place and a transition to any combination of alternatives could prove painful.

Jeff Rainford, Mayor Slay’s Chief of Staff argued that even if alternatives exist, a transition away from the earnings tax would take time.

“There is no way that you can turn one light switch on when you turn the other one off and it happens right away.  Virtually every idea that there will be to replace either all of the earnings tax, or a chunk of it, will necessarily need either state legislation and a vote of the people, or a vote of the people.  There will be special interests that will fight you every step of the way. ” 

In the meantime Rainford says, “Something will give…There isn’t much to cut besides public safety, because that’s what we spend money on.”

Dr. Howard Wall, an economist and a board member at the Show-Me Institute, agreed saying “The act of replacement is not an easy thing. ”  But unlike Rainford, Wall insists it’s a change that’s in the long term interest of a city that’s losing population and workers.

“The way you raise revenue to provide services really matters a lot. If you tax something that can move, then some of it will move.  If you can avoid the tax, you will.  If you can find ways to raise the same revenue that does not have as negative an effect, that would be beneficial to growth and the way to do that is to try to tax things that are less mobile and shift the revenue raising to things like user fees and broadening the tax base and things like that. ”

To hear their entire conversation about the earnings tax and possible replacements, visit the St. Louis on the  Air archive.