JEFFERSON CITY • St. Louis Mayor Francis Slay wants to brainstorm replacements for the city's 1 percent earnings tax, but likened a measure repealing the tax to "sticking a gun against" the city's head.
"The problem is not as simple as to say get rid of the tax," Slay said. "The challenge is what do we replace it with?"
Repealing that tax after next year is what Sen. Kurt Schaefer, a Republican running for attorney general this year, and several other lawmakers have proposed this session. A Senate committee Thursday heard testimony on Schaefer's measure from Slay, Kansas City Mayor Sly James and others.
Anyone who lives or works in both the city of St. Louis and Kansas City must pay this one percent tax. In St. Louis, it accounts for one-third of the city’s general revenue, generating $185 million in St. Louis last year. It pays for city services such as police and fire departments, park maintenance and street repair.
The proposition comes at a time when St. Louis already is strapped for cash, trying to keep the National Geospatial-Intelligence Agency and fund law enforcement. They also are facing the recent loss of the St. Louis Rams.
Sen. Scott Sifton, D-St. Louis County, asked lawmakers to keep that fact in mind when discussing this topic.
"The reality is the tax base had to take a hit this week with losing the Rams," Sifton said.
James said Kansas City likely would have to cut public safety if the city lost the earnings tax, its single largest source of general revenue. Public safety, he said, makes up more than 70 percent of the city's budget.
"It's a bleak future in Kansas City without the earnings tax," James said Thursday.
But Schaefer, from Columbia, said Thursday the earnings tax is unconstitutional based on a recent Supreme Court decision in Maryland.
"This is going to have to be addressed," Schaefer said. "Either there is going to be resolution ... on how to go forward or someone is going to file a federal lawsuit and they are going to win."
Sean Marotta, the attorney who argued the Supreme Court case, said the cities' tax was unconstitutional because no credit for income taxes paid to other states is provided.
City residents last approved the tax in 2011, an election forced by a Rex Sinquefield-backed proposition that bars the creation of any new municipal earnings tax in Missouri. St. Louis and Kansas City voters must reauthorize the tax every five years. If voters ever fail to pass the tax, it would be phased out over 10 years.
Voters in both cities will be asked to approve the tax again this year.
Schaefer has received $750,000 from Sinquefield, a retired investor and the state’s No. 1 political donor, in his quest for the attorney general’s office.
Schaefer said he hopes the bill opens the discussion about the earnings tax moving forward.
The committee did not vote on the measure Thursday.
The bill is Senate Bill 575.