CITY HALL – If city residents defeat one measure on the April 6 ballot, they could wind up with an extra penny in their pockets for every dollar they earn. But, says City Collector of Revenue Gregory F.X. Daly, all those pennies help fund basic services such as police and fire protection and parks.
Passage of Proposition E would allow the city’s 1 percent earnings tax on compensation and profits to remain in effect for five years before another election is required. Its defeat would start the clock to phase out the tax over 10 years.
Daly, who is a leader in the “Yes on Prop E – Earnings Tax STL” campaign, said defeat would have serious negative consequences.
The tax on income of everybody who lives and works in St. Louis raises about $240 million a year, or about 36 percent of the city’s budget. Without the earning tax, the city would have to raise property and sales taxes or sharply cut services, supporters say.
Those services include such things as police and fire protection, parks, tree trimming and a variety of other things, Daly said.
“Not retaining the earnings tax would be fiscally irresponsible and significantly impact our ability to provide essential services to our constituents,” Mayor Lyda Krewson said in a statement. “I am going to do everything possible to make sure that doesn’t happen.”
Daly said, “The economic uncertainty created by the COVID-19 pandemic underscores exactly why the earnings tax must continue to be protected. I look forward to working with Mayor Krewson to educate voters about the benefits of retaining the City’s earnings tax.”
The wording on the ballot will be: “Shall the earnings tax of 1%, imposed by the City of St. Louis, be continued for a period of five (5) years commencing January 1 immediately following the date of this election?”
Not everyone thinks it would be a bad idea to ditch the earnings tax.
Patrick Ishmael, director of government accountability for the conservative thinktank the Show Me Institute, said the tax hurt growth.
“There are cities that don’t have an earnings tax. They do just fine,” Ishmael said. “Earnings taxes hurt growth. They hurt people, particularly poor people.” He said the loss could be made up by cutting tax incentives such as tax increment financing and increasing other taxes such as property taxes and sales taxes.
Ishmael emphasized that the Show-Me Institute wasn’t taking a stand on Proposition E.
Under Proposition A, which was passed by state voters in 2010, residents of St. Louis and Kansas City must approve ballot measures every five years in order to extend their earnings tax. Voters in both cities approved five-year extensions in 2011. Proposition A also prohibited any other cities in Missouri from introducing an earnings tax.
Krewson and Daly both gave $25,000 from their campaign committees to start the effort to encourage passage of Proposition E.