Missouri’s two largest cities, Kansas City and St. Louis, both rely heavily on the earnings tax for revenue. Indeed, it’s the single largest revenue source for each city. But economists argue that the tax is a growth killer. Why should people move into a city and pay the tax when they can move next door and pay no tax? Why should employer stay in the city and keep paying the tax?
But the tax has remained, in part because of a lack of alternatives. How do you fairly and completely replace the lost revenues?
Economist Joseph Haslag outlines an alternative called a land value tax, or land tax in a paper for the Show-Me Institute. He argues that this is a fair tax, and a stable source of income because land values don’t fluctuate. The good news is that replacing the earnings tax, which hurts productivity, job growth and worker wages is eminently possible and likely would mean a small overall tax break for most city taxpayers.
Haslag offers distinct proposals for both St. Louis:
and Kansas City:
