Stay focused on the facts about Kansas City’s vital earnings tax

Attacks on Kansas City’s earnings tax in Jefferson City and here at home need to be repelled to protect the city’s future.

On Thursday, a Missouri Senate committee approved a bill that would phase out the 1 percent earnings tax in St. Louis over 10 years.

That measure once included Kansas City’s earnings tax, but this odious provision was scratched.

Hold the celebration.

The full Senate could always amend the bill to cram Kansas City’s tax back in. Plus, other pending earnings tax measures still endanger both Kansas City and St. Louis.

The General Assembly should not be trying to unilaterally kill a major source of funding for the two largest and most economically crucial cities in Missouri.

That’s especially true when voters in both cities will go to the polls on April 5 to decide whether to renew their earnings taxes for five more years.

As Mayor Sly James correctly noted Thursday: “The local earnings tax was, is and remains a local-control issue. Cities — all cities — should have right to decide how to govern themselves.”

Along those lines, James and others earlier this week kicked off their efforts to persuade voters to extend the earnings tax in April, for very good reasons.

The tax provides $230 million a year and accounts for more than 40 percent of the city’s general fund spending. More than 70 percent of the tax is used to support public safety, including police, fire and ambulance crews.

But some Kansas Citians in recent days have questioned the amount of the earnings tax diverted to support economic development in the city.

It’s a valid question that deserves accurate answers.

Every earnings tax dollar that’s swept out of the general fund and into a developer’s pocket to pay for a project is a dollar not available to pay for public services. The city should be more stringent than it has been in the past in giving away future earnings tax receipts.

One valid counterpoint from City Hall and developers is that projects often need some public help to make them feasible so they can contribute to the overall economic health of the city.

Here’s how much money we are talking about.

In the current fiscal year that runs through April 30, the city estimates that $19.1 million of total earnings tax revenues will be diverted to help pay for economic development projects.

That’s 8.3 percent of the expected receipts.

The remaining $210 million will be available to support public services, which is still a huge chunk of the general fund.

Unfortunately, not everyone seems to understand this part of how economic development programs work.

A spokesman for the Show-Me Institute — funded in large part by St. Louis multimillionaire Rex Sinquefield, an ardent earnings tax foe — said this week that the city should stop offering tax incentives and tighten its fiscal belt. The spokesman’s claim: These subsidies are “north of $100 million a year.”

No, they aren’t.

Add all of the city’s investments in economic development — through the earnings, sales and property taxes as well as direct public subsidies for projects — and it’s $77.6 million of diverted revenue this fiscal year.

That’s a big number. But it’s not close to being “north” of $100 million.

One more point: If voters reject the earnings tax renewal on April 5, the tax would disappear over 10 years, for a loss of $23 million annually. (That’s what a Sinquefield-backed state law, endorsed by voters in 2010, would require.)

Even if the city could magically recapture all of the earnings taxes now kept by developers — which it can’t — that money would not even make up for one year of lost revenue.

Kansas Citians will have their chance to endorse the earnings tax renewal on April 5 and keep the city on a path toward a brighter future.

Missouri lawmakers ought to stay out of the way, and misleading opponents should be ignored.

This story was originally published January 28, 2016 at 4:18 PM with the headline "Stay focused on the facts about Kansas City’s vital earnings tax."