JEFFERSON CITY, Mo. – A group of Missouri lawmakers will study and review the earnings tax paid by people who live and work in the state’s two largest cities.
The committee is tasked with looking for alternatives to possibly replacing a 1% tax.
If you live or work in Kansas City or St. Louis, you pay an earnings tax for the services the cities offer, like police, emergency services, and even parks. The 1% tax is a way for Missouri’s two largest cities to bring in hundreds of millions of dollars a year.
“First of all, it’s not the charge of this committee to take away your tax or to, in any way, affect the safety of the public,” said chairman of the special House committee Rep. Jim Murphy (R-St. Louis County).
In St. Louis City, 55% of nonresidents make up the individual portion of the earnings tax. The city brings in roughly $215 million annually from the tax, which is about 36% of the city’s general revenue.
“We have earnings tax revenue budgeted for fiscal year 2024 of about $313 million, which is almost about 47% of the total general fund budget,” said Tammy Queen, Director of Finance for the City of Kansas City. “The general fund is primarily used to fund public safety and that represents about 66% of general fund expenditures.”
In both Kansas City and St. Louis, that money is one of the largest sources of general revenue and has received wide support from city residents, who are required to vote on the earnings tax every five years.
“Reducing or removing the earnings tax will do serious long-term harm to the people of the entire state of Missouri in ways that will impact the process for decades to come,” said St. Louis City Collector of Revenue Gregory F.X. Daly.
House Speaker Dean Plocher (R-Des Peres) led the charge to form the Special Interim Committee on the Earnings Tax. He wants the group to focus on how Missourians are affected by the tax.
“The city advocates for an earnings tax to provide public safety, police, fire, the services we expect out of government, and I haven’t seen a lot of services provided by the city when it comes to public safety,” said Plocher. “I’m concerned with the crime in the city holding the state back.”
Plocher sponsored legislation this past session that would have allowed people to request a refund of the city’s earnings tax for any work they performed remotely during the pandemic. That bill passed the House, but died in the Senate.
Before this year, there had been previous attempts by Republican lawmakers to eliminate the decades-old tax.
“If we take this away, where does that leave public safety in our cities?,” said Rep. Maggie Nurrenbern (D-Kansas City). I, like many, as a mom and multi-generational Missourian, have a vested interest in making sure we have the resources to keep everyone safe.”
Members also plan to review how people who live outside the city, but work remotely, are subject to the tax.
“We saw that could be a serious problem for us as we moved into the pandemic world,” said Queen. “We could have an awful lot of telecommuting going on and that potential impact could be huge.”
Queen told the committee that the City of Kansas City allows those working in the city to apply for refunds for out-of-city days, meaning the employee traveled outside the city to work their job for a day.
Representatives on the committee said they are concerned that many who are required to pay the tax don’t get a say.
“You’ve got a small amount of votes for a large amount of individuals paying the tax on this,” said Rep. Mike McGirl (R-Potosi). “Your nonresident folks or remote workers, they don’t have this option, or any say in this process.”
Earlier this year, a St. Louis Circuit judge ruled the city could be forced to refund millions of dollars in earnings tax for charging nonresidents who worked from home during the pandemic.
“The position of my office is that the earnings tax should be applied to remote workers,” said Daly.
That lawsuit involving remote workers being required to pay the earnings tax is set to be heard before an appeals court in early 2024.
The committee plans to hold a hearing in St. Louis and Kansas City within the coming weeks and months.