Kansas City officials face a pretty big referendum soon, and not about a new airport terminal.
Missouri law requires the city to hold an election on its 1 percent earnings tax by next spring. Voters must approve the tax for another five years or it goes away over a 10-year period.
The tax passed easily in 2011, but city honchos are fidgeting. At Monday’s announcement of a new plan for a downtown hotel, several people said they were more focused on the earnings tax renewal in 2016 than any possible vote on a new terminal.
If anyone caught the dissonance of arguing for an earnings tax renewal while discussing massive hotel tax breaks, I didn’t hear it.
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It’s often said projects like the hotel or the new East Side grocery store don’t cost taxpayers anything. Construction costs are paid for by capturing the new taxes created by the projects, supporters say, not any existing public revenue. It’s a win for everyone.
But the claim always crumbles when it bumps against reality. Here’s why.
If your home or business catches fire, the fire department puts it out. That’s why you pay taxes, to support a service the community needs.
But let’s say the new grocery store catches fire. The fire department still shows up, but the store isn’t paying the cost — its taxes have been diverted for construction expenses. Someone else has to pay for the fire department and the new truck it bought to protect the new store.
That someone is you.
Now you know why the earnings tax is so important. Kansas City must raise its funds from residents and workers to pay for essential services that favored businesses don’t fully support.
City Hall says the trade-off is worth it. The new hotel will provide thousands of jobs and could bring in visitors who spend cash and leave sales tax dollars behind. The new grocery store means better food and more convenience for an underserved neighborhood. Those are good things.
Yet each of us might make the same argument about a lower earnings tax. Put some extra cash in my pocket and I’ll buy a Kansas City lunch more often or find a new sofa. Those activities increase employment and sales tax revenue too.
Handing out tax incentives to grocers and hotel investors isn’t necessarily bad. Handing out tax incentives, then claiming regular people don’t deserve a similar break, is a tougher political case to make.
You’ll hear it from city officials, though, sometime soon.