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Economy & Business

Now, earnings tax battle moves to city vote in April

This article first appeared in the St. Louis Beacon, Nov. 3, 2010 - With Proposition A cruising to an overwhelming victory statewide, St. Louis Mayor Francis Slay says the focus now moves to April and the pitch he needs to make to voters in the city:

"Losing the earnings tax without an acceptable plan to replace would be irresponsible."

Proposition A, decided by voters throughout Missouri, did two things. It barred any city in the state that does not now have authorization for an earnings tax from imposing one. And it forces St. Louis and Kansas City, which have 1 percent earnings taxes, to hold an election in the spring so voters in each city can decide whether to keep the tax.

If they vote to keep it, they would be required to hold a similar vote every five years. If they vote to get rid of it, the tax would be phased out over a 10-year period, with one-tenth of 1 percent shaved off the tax rate each year.

Slay is sure he needs to run a strong campaign to convince St. Louis voters that the earnings tax needs to stay. What he says he is not sure about is how strong a campaign will be run by opponents of the tax.

For Proposition A, Rex Sinquefield poured more than $10 million into the campaign to persuade voters to say yes. Marc Ellinger, a spokesman for the campaign on behalf of Proposition A, known as Let Voters Decide, said Tuesday night that his organization has no plans at this time to get involved in the spring elections in St. Louis and Kansas City.

Asked whether Sinquefield will be involved, he said he could only speak for the campaign, not for Sinquefield. A spokeswoman for Sinquefield had said before the election that he would not be available to comment on the results, but late Tuesday night, he issued this statement:

"Tonight, close to 1.2 million Missourians voted overwhelmingly for a voice in how they are taxed by their local governments and this spring, St. Louisans and the people of Kansas City will have that opportunity again."

Ellinger said that as far as Proposition A, "we succeeded in what we wanted to do in this race, and we're excited with the results." Their intention all along, he said, has only been to force the vote in St. Louis and Kansas City and block the way for other cities to impose an earnings tax.

"Hopefully the voters in April will listen to all the facts and not be swayed by the scare tactics they heard this time and will make a good decision," he said.

Asked what scare tactics were used, he said that opponents of Proposition A had made it sound like a positive vote would end the earnings tax, instead of simply giving voters the right to have their say in the spring.

"Tomorrow morning," Ellinger said, "when everybody wakes up, there will be no layoffs. There will be no impact on the budgets of St. Louis and Kansas City.

Mark Jones, who headed the campaign against Proposition A, noted that though it won big statewide, it was defeated in St. Louis. In Kansas City, the other city affected, it lost in the Jackson County portion of the city but won in the parts of the city that are in three other counties, for a total vote of 52 percent for and 48 percent against.

"The practical impact of tonight's election," he said in a statement, "is Rex Sinquefield spent $11.2 million to make a minor change to Missouri law and learn that the voters of Kansas City and St. Louis will reject his policies come April. After tonight's Pyrrhic victory I would not be surprised if Sinquefield and his paid consultants simply decided to leave St. Louis and Kansas City alone."

Alderman Steve Conway, chairman of the Ways and Means Committee, noted Wednesday that St. Louis voters came out even more strongly against Proposition A than voters in Kansas City, even though the campaign against the measure started earlier and was more vigorous in Kansas City.

To Conway, that fact, plus the 68 percent vote against Prop A in St. Louis, means that most of the heavy lifting needed for the next vote in April has already been done.

"The community came out and said that elimination of the earnings tax is bad for business, bad for St. Louis and bad for the region," he said.

He also challenged Sinquefield to put his money to more productive use to help the city rather than mount another campaign against the earnings tax in the spring.

"What I'm telling Mr. Sinquefield is that it's a waste of his money," Conway said. "Even if he spent $100 million, the voters aren't buying."

As far as possible acceptable alternatives to the earnings tax, Conway said they don't exist. You could take other taxes and fees and double them and it wouldn't even make a dent in the $13 million each year over 10 years that the city would stand to lose, he said. (The city takes in about $130 million a year in earnings tax. If it voted to abolish the tax, it would lose one-tenth of the tax each year until it was receiving no earnings tax after 10 years.)

"We have a mix of taxes that all have different impacts and all react differently to different econonic conditions," he said. "It's transparent, and it's fair."

Slay had said before Tuesday's vote that he had assumed Proposition A would pass because of the way it was written, so his focus all along has been on April.

Now, he said Tuesday night about the loss of the earnings tax, "our job is to inform the public as to why it would be devastating to the city of St. Louis and would impact dramatically our ability to provide quality police and fire protection and the other services people enjoy and deserve.

He noted that compared with this midterm election, the ballot in April will be smaller and more focused. "There will not be a lot of noise as there was in this election. It will be a simple issue, not as confusing as Prop A was. The people of St. Louis will understand it, and if they do, they will retain the tax. But we're not taking that for granted."

He said there is not yet an acceptable plan to replace the revenue from the earnings tax -- about $135 million a year, about the same amount as it takes to run the city's police department.

Speaking of the police department, voters in the city overwhelmingly passed Proposition L, an advisory referendum on whether the city should regain control over the police. Slay said he thinks lawmakers in Jefferson City will sit up and take notice. 

If the state continues to block efforts to establish local control, Slay said, "I think it would show a lot of disrespect and would be an insult to the people of St. Louis who have shown an overwhelming desire to have their own police department.

"The people of St. Louis do pay the bills, and they should have their own police department. It's a real simple concept."

Noting that the city lost control of the police during the Civil War, Slay said:

"The Civil War has been over for a long time. It's about time the people of St. Louis are able to have their own department."

In other statewide propositions:

All three amendments -- for an elected assessor, a homestead property tax exemption for disabled POWs and to prohibit a real estate transfer tax -- won majorities statewide.

Proposition B, to strengthen regulations on dog breeding operations, held a slim 51-49 percent lead after trailing for much of the night.

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