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Pros and cons of St. Louis earnings tax ballot measure that goes before voters on April 5

Proposition B asks to voters to allow their local city or county to continue collecting sales tax on cars bought out of state
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Those headed to the polls in St. Louis in 2012 will be voting in an election run by a different St. Louis Board of Elections. Three new members were named today by Gov. Jay Nixon. (via Flickr/ Daniel Morrison)

On Thursday’s St. Louis on the Air, guests discussed the contentious St. Louis earning tax (Prop E) that goes before city voters on April 5. Proposition E is a vote to either keep or phase out the city’s earning tax. If you are a wage earner and live or work in the city of St. Louis, you pay the city’s 1 percent earnings tax. More background on that here.

Thinking on whether the earnings tax is a boon or a bust for St. Louis city is sharply divided. 

A proponent and opponent of the earnings tax joined host Don Marsh on Thursday to discuss the proposition. Paul Payne, the budget director for the city of St. Louis, came out to support the earnings tax. Travis Brown, political advisor for Rex Sinquefield, came out opposed to the earnings tax, advocating a phase-out approach.

Initial statements

Paul Payne
Credit Kelly Moffitt | St. Louis Public Radio
Paul Payne

PRO: “The city’s earnings tax is the largest source of revenue to the city. It funds, in this year’s current budget, $164.3 million estimated, which is greater than the entire budget for the police department and equivalent to a slew of city services from the fire department, street maintenance and park maintenance, what have you,” said Payne. “Something as large as the earning’s tax and its revenue is a crucial component of our budget each year. There is no way we could fund the budget without it. … It would be a major loss to the city.”

CON: “There’s no doubt it is a big part of the city’s general revenue,” said Brown. “That’s why the folks like those at ‘Vote No on Prop E’ said we need not a hard fiscal cliff but a gradual 10-year phase-out. More than a decade is long enough that reduces the annual city revenue concerns on a tax that is unfair to working families because it taxes on 100% of their income more so than folks who can avoid it and those who can find ways to abate future income. … The responsible thing to do is to see this is hurting our city and look over some gradual 10-year phase out.”

On the ‘regressiveness’ of the tax:

PRO: “From a standpoint of planning for the future, it would be almost as if you were to reduce your income, quit your job, go to a bank and say ‘I want to take out a home loan and make it due in 10 years,’ and you would be left with the bank saying ‘How can I loan you the money without a plan in place to replace it?’ No one would lend money in that case and I think the city would be in that shape as well,” said Payne. “What you’re saying is we’re going to eliminate the largest source of revenue to the budget and you’ve got nothing to replace it that has been identified. A lot of the plans that have been produced include significant increases in sales taxes and property taxes. You’re talking about taxes that are regressive and not equitable.

Travis Brown
Credit Kelly Moffitt | St. Louis Public Radio
Travis Brown

CON: “We’re dealing with a city that is not growing like we hoped and a lot of structural dependencies,” said Brown. “Our mayor, who we know and love and have been meeting on this issue for the last five years, understands this fact that we are serious about growth to the city. The mayor also understands that we become too dependent and he’s talked about not being over-reliant on any one source of revenue. Why is it so harmful? Not everybody pays at the same rate. I’m sorry, it is not as progressive and it is very regressive in ways that deal not only with the city budget office but from individual taxpayers and working families.

“Let me break that down, I’m in the 28th Ward. A lot of people have above average incomes there. Most people have tax preparers and advisers who advise them on how to shield that income. Bottom line? A lot of people in my ward don’t pay on 100% of their taxable income. Folks further north in lower income, working families, do pay on 100% of their working income. That’s not progressive. That’s very regressive and makes it very difficult.

PRO: “What Travis is referring to is income,” said Payne. “This tax is an earnings tax, not income. What the difference is that those who are in retirement, who are earning on Social Security, that’s not subject to the tax. If you have a job and are making wages, that’s what you’re being taxed on. It is proportional. The more you earn, the more you pay.”

Listen to the rest of the discussion, which covers tax-increment financing, sales tax, taxation without representation, job creation, the possibility of a city-county merger and more:

St. Louis on the Air brings you the stories of St. Louis and the people who live, work and create in our region. St. Louis on the Air host Don Marsh and producers Mary Edwards, Alex Heuer and Kelly Moffitt give you the information you need to make informed decisions and stay in touch with our diverse and vibrant St. Louis region. 

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Kelly Moffitt joined St. Louis Public Radio in 2015 as an online producer for St. Louis Public Radio's talk shows St. Louis on the Air.