Supporters of Kansas City’s 1 percent earnings tax are mounting an urgent drive to persuade voters to renew it on April 5. Along the way, fervent opponents will continue sniping at the tax.
Backers can’t take victory for granted. Sure, in 2011, an overwhelming 78 percent of voters approved extending the tax. But this campaign already has a more competitive feel to it.
The Star recommends extending the tax another five years. It generates $230 million a year, which makes up about 40 percent of the city’s general fund. More than 70 percent of that money is used for public safety. The tax is collected from people who live and work in Kansas City. People who live outside the city help pay for the services and amenities they are provided inside the city.
In recent days, off-base criticism of the tax has come in the form of a radio advertisement and in emails.
▪ At one point in the radio ad, the narrator tells people to call Mayor Sly James, partly because he allegedly has been using “scare tactics to keep your attention away from the facts.”
The narrator says: “He never mentions the millions of dollars of your taxes that he gives away to wealthy real estate developers.”
Under state law, the city can allow developers to keep up to 100 percent of the earnings tax revenues that workers generate at a new development. The money is reinvested into that project, and often pays for public improvements such as roads and parking structures.
In reality, more than 90 percent of earnings tax collections go for exactly what most people expect — basic city services. Those dollars are not given to developers.
That’s because the great majority of people who pay the tax are not employed within projects that benefit from public incentives.
▪ One misstatement being circulated is that the earnings tax is funding “shortfalls” for Sprint Center and the new streetcar.
Sprint Center is a success, and hotel and car rental fees generate more than enough money to pay off its bonds.
The streetcar is financed by higher property and sales taxes. Officials say those revenues are exceeding projections of what’s needed to operate and maintain the two-mile line.
▪ Finally, the leader of one anti-tax group mixed fiscal apples and oranges in arguing for a large cut in city subsidies.
If voters reject the earnings tax, it would be phased out over 10 years, essentially reducing city revenues by $23 million a year. As this opponent accurately noted, the city this fiscal year expects to allocate $77 million for economic development projects.
“A good start would be to cut that giveaway to $50 million next year,” writes Dan Coffey of Citizens for Responsible Government. “We just made up one year of earnings tax loss.”
No, that doesn’t work.
First, the city has contracts with dozens of developers that have poured billions of private dollars into their projects over the last 25 years in return for public subsidies that include future earnings, sales and property taxes diverted from City Hall. The city cannot unilaterally renege on $27 million worth of those contracts.
Second, the total amount of the earnings tax that is diverted to economic development is $19.1 million a year. So even if the city could find a legal way to pull out of every earnings tax deal it has with developers, the savings would be less than one year’s worth of lost tax receipts.
Opponents will offer many other simplistic “solutions” until Election Day. Voters instead should look at reality: Kansas City’s earnings tax is a fair way to raise a substantial amount of money for crucial city services.