Friday, February 09, 2007

New Take On the Earnings Tax?

At STL Rising, we try to focus on the positive things going on in St. Louis. One topic that has been a long time challenge for the city is the 1% earnings tax. It's a simple enough thing-live or work in the city, and pay 1% of your gross pay to the City of St. Louis.

The City needs the money. The earnings tax provides a major part of the City's general revenue. Lots of people will say that as much as we wish we didn't have it, there's no way we make it without it. Well, I've been giving this some thought, and you know something, maybe there is.

Sure, there's no way we could say, drop the earnings tax this year and replace it with a property tax. Some argue for a "land tax" (a tax on vacant land), and maybe that'd help some. But it's questionable whether that'd replace all the revenue from the earnings tax. Here's another idea...

The city is growing. We are working to attract jobs, and we are building housing. The city is working to increase its tax base. As tax abatements run their course, real estate taxes can increase. And as employment grows, we get more people paying earnings taxes.

Okay, so I'm not an expert on this, but I think the city budget is something like $350,000,000 per year. What if we set a ten or fifteen year goal to remove the earnings tax? And lower it a little each year for the next ten or fifiteen years?

Say in 2008 we went from 1% to .9%. It would be just a little, but it would be a step. Then see how the budget goes. Apply the decrease to all workers-not just new employees. Then say in 2010 lower it again, say to .8%

Meanwhile, we keep working to draw more residents and jobs to the city. More residents and more jobs mean more economic activity, and more revenue flowing to the city. So say in 2012, we lower the earnings tax again, say to .6%, and so on.

Who knows? Maybe by 2020, the earnings tax is worked down to zero, the city's population reaches 450,000, and our workforce is 50% larger than it is today.

And we could start working towards a shared civic goal with a tiny 1/10 of 1% reduction in the rate of our current earnings tax. Any takers?

6 comments:

Urban Review said...

I like the concept. The law could even have some triggers that keep if from going down anymore if we get to low in any given year?

I guess the thing to do is the math to see how many more jobs/residents we'd need to make up for going from 1% to 0.9%. Hell, it could even be 0.95% in the first year.

If it doesn't work out we can always lease some land to some big employer...

Brian said...

Great ideas; I was thinking of a similar approach:

http://downtownstlbiz.blogspot.com/2007/01/david-nicklaus-column-in-todays-post.html

Rick Bonasch said...

Brian-

Good ideas at your blog. I think we could be successful if we take a longer range approach rather than trying to quickly remove the tax.

We just need to be willing to take the first step.

RB

Brian said...

Exactly. I'd just like to see the city acknowledge that it's trying to address the problem and is working towards phasing out the tax.

The property tax plan floated by the Show-Me Institute sounds a bit extreme and would be a very difficult sell anyway. That said, I do think that property tax in the city could probably be raised a little - the taxes I pay on my house in the city are very low in comparison to suburban communities.

Howard said...

One of many problems with this is that as the population increases, so does the need for services.

Our local government financial future is better than St. Louis County's and one of the reasons is because we have the earnings tax.

Anonymous said...

We'd love to live in the city, but the schools and the earnings tax keep us away. I work in Edwardsville and my wife works in Chesterfield, so something along the 40 or 44 corridors would work great. I couuld forgive the earnings tax if the schools were better. We live in Shrewsbury instead...