Kansas City responds to legislation against earnings tax

KANSAS CITY, Mo. -- A Missouri lawmaker's effort to eliminate earnings taxes in Kansas City is based on faulty legal reasoning and would decimate the city's budget, civic and business leaders said.

Missouri Sen. Kurt Schaefer, a Columbia Republican, has pre-filed a bill that would eliminate the earnings taxes in Kansas City and St. Louis by the end of 2017.

He said the taxes are outdated and "clearly unconstitutional."

A public statement issued Wednesday by Kansas City Mayor Sly James, the Greater Kansas City Chamber of Commerce and the Civic Council defended the 1 percent earnings tax as a "sound and fundamental way for Kansas City to finance city services."

The earnings tax, which is paid by anyone who lives or works in the city, has been Kansas City's main revenue source for years. The earnings and corporate profits tax together generated nearly $234 million in the fiscal year that ended April 30, which was nearly 45 percent of the general fund, The Kansas City Star reported.

When filing his bill Tuesday, Schaefer cited a U.S. Supreme Court ruling in May that Maryland's policy of providing only a partial credit for income taxes paid to other states was unconstitutional.

He equated the earnings tax to the Maryland policy and said allowing Kansas City residents to keep more of their earnings would help economic growth.

But James and the city attorney's office in Kansas City argued Kansas City's earnings tax, paid by anyone who lives or works in the city, is different from the tax structure cited in the Maryland case.

City residents are scheduled to vote in April on whether to renew the tax for another five years.

If the tax is rejected, it would be phased out over 10 years.

The city finance department chart said if voters reject the tax and no new revenue source is identified, it could cause the loss of 800 uniformed police officers, 550 firefighters and hundreds of other city employees.

The proposal is supported by Rex Sinquefield, who in 2010 bankrolled a statewide ballot measure that required the earnings tax be approved by Kansas City and St. Louis voters every five years.

Schaefer's campaign for attorney general has received $750,000 in donations from Sinquefield, a Republican, who has donated more than $22 million to Missouri candidates and causes during the last five years.

"The voters in Kansas City should be able to decide this issue," said state Sen. Ryan Silvey, a Kansas City Republican and vice chairman of the Senate appropriations committee. "For the Legislature to step in and take away our right to vote, which was given to us by the entire state back in 2010, that's not appropriate."

Silvey said he's "not a huge fan of the earnings tax," but it's irresponsible to end it without a plan to replace the lost revenue.

Senate Minority Leader Joe Keaveny, D-St. Louis, said in a statement policies approved by voters "should not be changed at the whim of the Legislature."

The earnings tax accounts for about a third of St. Louis' budget.

Mayor Francis Slay's chief of staff, Mary Ellen Ponder, said in an email, "We are confident that a majority of the senator's colleagues will still support local control."

House Minority Leader Jake Hummel, a St. Louis Democrat, and Assistant Minority Leader Gail McCann Beatty, a Kansas City Democrat, accused Schaefer of "vendetta-based governance."