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Government, Politics & Issues

St. Louis officials say city government would cease to function without earnings tax

This article first appeared in the St. Louis Beacon, Dec. 30, 2009 -  If wealthy financier/political activist Rex Sinquefield gets his way and eliminates the city of St. Louis' earnings tax, city officials say the impact would be "both disastrously serious and disastrously negative," according to documents filed with the state auditor's office.

In fact, city officials say that if St. Louis loses the $141 million collected annually from the one-percent tax, which provides close to 40 percent of the city's income, "it could no longer function as a viable city government."

Loss of the earnings tax, without replacing it with a roughly equal source of revenue, "would result in cuts to public safety services so deep as to end the City's viability as a place to live, work and visit,'' officials say.

Such dire predictions are offered by officials from the city of St. Louis, and their counterparts in Kansas City, in fiscal notes prepared for state Auditor Susan Montee, whose staff prepares fiscal assessments for all proposed ballot initiatives.

The city's concerns indicate that Mayor Francis Slay isn't likely to support Sinquefield's effort, despite the $75,000 that the St. Louis native has donated this year to the mayor's campaign coffers.

Sinquefield has contended that the tax -- levied on all who live or work in the city -- impedes St. Louis' development, and has proposed that other alternatives, such as a land tax, be instituted instead.

Cole County presiding commissioner Marc Ellinger, a lawyer, was hired by Sinquefield to craft a number of proposed ballot initiatives dealing with the two urban areas' earning taxes.

So far, Secretary of State Robin Carnahan has approved five for circulation. Supporters must collect tens of thousands of signatures from registered voters in six of the state's nine congressional districts (the exact number depends on which six are targeted).

At least one of the five would do away with the earnings taxes, while others would require new public votes.

Ironically, the state of Missouri -- currently also cash strapped -- would gain millions of dollars a year in new revenue if the city earnings tax was abolished. That's because the tax is deducted on affected residents' state tax returns. If there's no city earning tax, they have to pay state taxes on the money they've saved.

In the city's fiscal note, officials assert that without the earnings tax, the city "would be forced to make deep cuts in vital city services including police and fire. Those cuts most certainly would result in a loss of businesses and population.

"If you assume the City were to lose 10% of its businesses and 10% of its population, it would lose another $31-million in tax revenue. So, combined, the City would lose 47% of its current general fund budget,'' city officials argue.

"...Obviously, if the City lost 47% of its discretionary funding, the results would be so disastrous that they would result in the City's ruin. For instance, the elimination of the estimated 47% of City General Fund revenues would result in the elimination of more than 2000 jobs...."

This summer, the Beacon published an analysis of the earnings tax by two St. Louis University professors, who concluded that it would be hard for the city to come up with an alternative tax that raises as much money, without falling even more heavily on city residents.

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