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Vote No On Prop A – October 28, 2010

This November 2nd, voters in Missouri will be asked to vote on Proposition A, which is an outright attack on the primary revenue sources of Kansas City and Saint Louis. Both KC and StL have a 1% income tax on the books which affects both residents and workers of those respective cities. This issue affects Saint Louis as much as it does Kansas City, but as I am a citizen and booster for KC, I will be concentrating my efforts here.

Kansas City, Missouri has an annual budget of around $1.3 billion dollars. The money comes from a variety of sources, but the largest is the city’s 1% e-tax. The general fund for the annual budget is a little less than half of the total, or a little above $500 million. 40% of that general fund comes from the e-tax, or around $200 million.

I’m throwing around a lot of numbers here, but the important one is this; over $200 million dollars stands to be lost from the city budget with the elimination of the e-tax. Think city infrastructure is bad now? Think parks and community centers are currently under-maintained? Watch what happens with 40 percent of the general fund, and more than 15% of the total budget wiped out. Kansas City, Missouri has a lot of problems as it is. It is a large, sprawling city with a low population density, and is ill-equipped at this point to handle a huge drop in the annual budget.

What happens when that money disappears? Well, either a large number of services gets cut, or other taxes and fees appear. More likely that both will happen. Sales taxes and property taxes could both skyrocket. People think that cutting one form of tax means taxes go down. This is a common myth. Unfortunately, in the real world, this type of money needs to be made up. I hear people frequently claim the city should tighten its belt and the city government should shrink in size. I argue that a smaller government is not always a better government, no matter what conservatives and libertarians claim. For a city of half a million people to thrive, it must be run in an intelligent manner. And getting rid of the largest source of civic income is hardly intelligent.

Opponents of the tax claim a few different things. One, they sometimes claim they’re not trying to repeal the tax, just put it up for referendum. On the surface, this appears true. The actual proposition would force a referendum for both KC and StL every five years, starting with next April, until the tax is repealed. It also, however, prevents any city in the state from instituting its own income tax. This means that if KC ever repeals the tax, there is no coming back. The idea clearly is meant to eventually repeal the city e-tax, just at a slower pace.

Another claim is that the very nature of the city income tax is undemocratic. This cannot be farther from the truth. In 1963, a 1/2% earnings tax was approved by Kansas City voters, and it was then raised to a full 1% in 1970, also by democratic vote. The concept of a referendum is not a wholly terrible one, however, with the restriction of no additional taxes ever allowed, even by vote, it becomes a dangerous concept.

The individuals and groups responsible for Prop A often claim that businesses are hurt by the tax. The “studies” then used to prove this are often vague and amateurish and are just speculation based on right-wing economics. They generally don’t, or can’t, counter the argument that before city income is cut, alternative measures should be put in place.

That is something that bears repeating. Before any source of revenue is removed, the consequences should be analyzed, and alternatives should be developed. This proposition is merely an ideological attack on the very nature of income taxes. It has nothing to do with smart governance. Prop A seeks to weaken cities already plagued with debt and infrastructural weaknesses. It seeks to promote business without analyzing if businesses are really helped by eliminating a small personal earnings tax in the two largest cities in the state.

The architects of this proposal, Marc Ellinger and Rex Sinquefield, stand to gain nothing by seeing Kansas City hurt by outside forces, yet seem driven to do so anyway. Sinquefield is a wealthy businessman from St. Louis who has financed multiple efforts at eliminating sources of revenue for local governments. Ellinger is a Jefferson City attorney and the official spokesman of the Let Voters Decide campaign, which is the driving force behind Prop A. Neither man has a vested interest in Kansas City, and neither should have any right to control how KC is run.

Part of what this issue comes down to is the concept of local control versus central (state) control. I find it amusing that conservatives and libertarians, who have always been the loudest advocates for reverting the influence of governments down to the local (civic) levels, are the ones leading this fight. They seek to control the destinies of two independent cities from the capital of the state. Kansas City and Saint Louis proper contain about 15% of the state’s population, but carry a much more sizable percentage of the state’s economy. Cripple the cities, and the rest of the state will surely go down with it.

25 of the 150 largest cities in the U.S. levy a local income tax. Most go with 1%, while a few, such as Cleveland, run a 2% rate, and Philadelphia is at almost 4%. Most of the cities that require an income tax are like Kansas City, large, older cities with an aging infrastructure and not a lot of alternatives for revenue. No major natural resources or extra sources of income, such as gambling, to help lighten the financial load.

In a perfect world, Kansas City should be able to find more money from sources other than residents’ and worker’s incomes. However, at this point, no worthy alternatives have been suggested, and none have been proven to work. A 1% tax is hardly an intrusive one. An individual making $50,000 per year would pay $500 in total taxes to the city via direct income. Not an amount to be ignored, but realistically, over the course of a year’s worth of paychecks, not a truly big deal. I have never been rich, and in the past decade have never made enough money to have to pay even $500 in a single year, yet I can honestly say it has never hurt me to contribute my 1% to the city I live in. A small price to pay to keep Kansas City running.

If Prop A is passed, then the potential repeal of the city income tax will come up on the ballot in April. Do you wish to retain this tax, and continue funding the city through these uncertain economic times? Or, do you wish to punish Kansas City for the temerity of wanting to remain competitive with the the region, and the rest of the country? The choice is yours. My choice, however, is clear. I’m voting NO on Proposition A. I want to keep Kansas City running.