This article first appeared in the St. Louis Beacon, April 14, 2011 - On Tuesday, April 5, St. Louis voters finally got a chance to voice their opinion in the great earnings tax debate. Nearly 40,000 of them turned out to do so -- a very respectable showing for an off-year election which had no hotly contested races for citywide offices.
The E-tax proved to be far more popular than most politicians, winning with 88 percent of the vote.
As the tax comprises about one-third of city revenue, that result would seem to be good news for those trying to keep the civic ship afloat. Even more glad tidings arrived with the first quarter collections report: E-tax revenues were up substantially from one year ago.
One would think an overwhelming electoral verdict in favor of the tax combined with clear-cut evidence that it is performing better than expected would be enough to table further discussion of its abolition. One would be wrong.
No sooner had the votes been tabulated than two studies about how to replace E-tax revenues were released. These were funded by renegade, "not-a-billionaire" Rex Sinquefield, who believes local income taxes thwart economic development. And far from feeling vindicated by their victory at the polls, the powers-that-be at City Hall tended to characterize the result as a "reprieve' that bought them time to study alternatives.
To make sense of these paradoxical developments, it is necessary to examine the unusual relationship between Mr. Sinquefield and Mayor Francis Slay and to understand what it is that makes this tax so objectionable in certain quarters.
At a glance, the principal players here would appear to be natural born political adversaries. Sinquefield is an ultra rightwing former hedge fund manager who denies being a billionaire, but who had enough spare change to spend more than $11 million to support Proposition A in last November's elections.
Prop A -- which passed -- sought to outlaw municipal earnings taxes in Missouri. Cities that did not have such a tax could never levy one; the two that do (Kansas City and St. Louis) would have to put the tax to a popular vote every five years. If voters in either city ever decided not to retain the tax, it could never be re-imposed there.
Slay, on the other hand, is the Democratic mayor of a big city that heavily depends on the E-tax to fund its public safety operations. The men seem to embody the irreconcilable differences between conservative and liberal ideologies, but first impressions can be misleading.
Along with being an anti-tax champion of right-wing causes, Sinquefield is also Slay's biggest campaign contributor.
The mayor basically sat out the campaign against Prop A last fall, reasoning that voter sentiment would favor a tax-limiting initiative in most of the state. He would conserve his considerable political resources for the spring campaign to retain the tax in St. Louis.
That rationale proved prescient. When Slay flexed his muscle on behalf of Prop E to keep the tax locally, Sinquefield retired to the sidelines. Now that both phases of the voting are over, the un-billionaire has unveiled his privately funded studies on alternative forms of taxation while the mayor has interpreted an 88 percent plebiscite in favor of the status quo as a call for change.
The tortured contortions of bedfellow politics notwithstanding, the question remains as to just what it is that has made this seemingly innocuous levy the center of such extended controversy.
After all, most major cities have the tax or its alternative. Being a flat percentage, it is inherently graduated -- the rate remains the same across income levels; but 1 percent of a lot is more than 1 percent of a little. It is also flexible in that it automatically adjusts for inflation. Best of all, it is fair -- everybody pays; no deductions and, at least theoretically, no exemptions. The burden of public safety is paid for by all who live or work in the city.
I suspect that it is this final aspect of the tax, its fairness, which inspires the fiercest opposition to it. On paper, the United States has one of the highest corporate tax rates in the world. In practice, it has one of the lowest.
Last year, for instance, General Electric paid no federal income taxes. By contrast, I -- whose gross revenues were somewhat less than those of GE -- paid $16,538. Think about that for a moment: a retired cop who works at the sheriff's office donated $16,538 more for the support of the republic than did the nation's largest corporation. Meanwhile, Congress debates how badly to screw the elderly in the interest of deficit reduction.
In St. Louis, earnings taxes are collected from three sources: 1 percent of employee wages, one-half percent of employer payrolls and 1 percent of corporate profits. During the first quarter of 2011, employee/employer contributions were up slightly from the same period a year ago, reflecting a modest improvement in the employment picture. But revenues from corporate profits rose 50 percent. How can we attract and retain good corporate citizens if we expect them to pay taxes like their flesh-and-blood counterparts? It is, quite literally, un-American.
Personally, I voted for Proposition E because when all is said and done, enough is enough...
M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon.