MO Prop A: If it passes, who wins, who loses?

In Missouri the battle over the November ballot initiative, Proposition A, is hot. There is a lot of confusion over what Prop A is and, if passed, what this will mean for Missourians. With talk centered around the struggling economy and the Bush tax cuts in particular, this local issue could set a standard for other cities and states in the way Arizona’s SB 1070 did for states regarding immigration policy.

The Missouri Tax Initiative, or Prop A, would allow Missourians to decide the fate of St. Louis and Kansas City earning taxes and prohibit any new earning taxes throughout Missouri. If passed, Prop A would not immediately repeal the earnings tax. Instead, it would force St. Louis and Kansas City residents to vote every 5 years whether to keep their earnings tax or phase it out. If Prop A passes, the first such vote will be in April of 2011. Of course, if the earnings tax is then voted down, there will be no subsequent votes.

On the face of it, allowing voters a choice sounds like a great idea, and that is exactly what proponents of the measure are emphasizing in their final push before the November elections. However, a yes vote on Prop A is also a prohibition on any new earnings taxes throughout Missouri, even if voters later decide it is in their best interests.

What is the earnings tax (or e-tax) used for and, if Missouri voters choose to phase it out, how will we replace the lost revenue?

Kansas City, Missouri

To fully understand the scope of this measure, we need to know how much St. Louis and Kansas City rely on the e-tax and what services this tax pays for.  In St. Louis, the e-tax represents more than one third of the operating budget, and in Kansas City the e-tax makes up nearly half of their operating budget, at 40%.

Earning taxes in both major cities help fund essential services that keep the city safe and livable for everyone; services like law enforcement, road maintenance, the health department, and fire fighting. This tax also helps pay for snow and trash removal, city employee salaries, and after-school programs. Amenities such as parks and recreation and the Kansas City zoo are funded by the e-tax as well. With Missouri cities already making budget cuts, what would such a loss mean for these services?

St. Louis Comptroller, Darlene Green, has called the initiative “disastrous” and said, “Without the earnings tax, it is easy to see that the city of St. Louis would be forced to make drastic cuts in public safety and virtually every other service provided to taxpayers.”

The Kansas City firefighters union has also come out against Proposition A. Captain Sherwood Smith of Local Union 42 stated last Tuesday that no earnings tax “would mean fewer firefighters to protect our citizens, increased response time for EMS units” and that it would “place those who live and work in Kansas City in greater danger.”

Without an earnings tax, these large cities will have to generate revenue in other ways if they hope to continue funding public services. Two suggestions for replacing this revenue involve increasing other taxes: property tax and sales tax. But in order to fully compensate for the elimination of a 1 percent earnings tax, the Missouri Budget Project estimates that both cities would have to increase property taxes by 400%, or city sales tax would need to be tripled in St. Louis and doubled in Kansas City.

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