Kansas City Mayor Sly James recently said he opposes a lid on local sales tax rates.
The General Assembly is thinking about capping sales taxes at 14 cents on the dollar. Supporters think that’s high enough for most cities to get by.
“This is dangerous legislation,” James said. “I’m not asking the state legislature to do anything other than leave us alone.”
On that second point, the mayor is close to the mark. Missouri’s lawmakers, particularly those from rural areas, take disturbing pleasure in telling Kansas City and St. Louis what they can and cannot do — on the minimum wage, gun laws, taxes, other municipal policy.
The state runs the Kansas City Police Department, for heaven’s sake.
But the mayor should pay more attention to the uncontested fact that Kansas City’s tax structure places an excessive and unfair burden on the poor and on working class residents.
In 2016, for example, a Kansas City family earning $25,000 a year paid 12.6 percent of its income in state and local taxes, according to a well-respected study from Washington, D.C. That’s the eighth highest rate among major cities.
A family earning $150,000 paid 11.4 percent of its income in taxes.
The sales tax is one reason why. The total Kansas City sales tax rate already scrapes 9 percent in some areas, higher in 2016 than the rate in Atlanta, Las Vegas, Boston, Detroit, Philadelphia or Washington, D.C.
Missouri, unlike Kansas, reduces its sales tax rate for food purchases, which limits the regressive bite of the tax. But Kansas City and Jackson County collect full local sales tax on food. That dings poorer residents.
In 2012, the mayor’s Citizens Commission on Municipal Revenue considered pursuing a reduction in the local sales tax on food and medicine, which would require state approval.
The idea was discarded because “the loss of revenue to the City would be significant.”
The loss of revenue to poor people was apparently a lesser concern.
The city’s tax burden is also unbalanced because of its flat, 1-percent earnings tax (which was due this week, by the way.) “The earnings tax is somewhat regressive,” the tax commission conceded in its report.
But there’s another problem. Earnings taxes are only collected on earned income such as wages and salaries. Unearned income — pensions, Social Security benefits, retirement investments — are not subject to the tax.
That means the minimum wage server at the coffee shop is paying the tax while his customer, a retiree, probably isn’t.
There are other things to think about. “Business taxes are low compared to national averages,” the 2012 commission found. Additionally, tax breaks and exemptions for business recruitment in Kansas City hack away at the tax base, pushing more of the burden onto regular citizens.
All of this should be on the mayor’s radar, and the radars of the men and women who want to replace him next year.
Taxes should be simple — easy to collect and understand. They should be as low as possible. And they should be fair, based in part on ability to pay.
Kansas City’s tax structure meets the “simple” test. But local taxes are not low, and they are not fair.
It will be easier to keep state legislators from mucking up the local waters if Kansas City’s leaders understand that.