Category Archives: City Earnings Tax

One Kansas resident wonders about the Kansas City earnings tax, and where local governments get the authority to tax the earnings of out-of-state workers who do not have a say in their tax burden:

Today, the sneaky practice of taxation without representation is back, and practiced regularly in America. Two cities engaged in this practice are St. Louis and Kansas City Missouri. The city taxes levied on earnings for all people who work in these towns amounts to a one percent earnings tax on the gross income of workers.

A number of years ago, while working in a bank in Kansas City, I asked my employer why my wages were being taxed by Kansas City, since I did not live in Kansas City. Since I was not a resident of the city, it was my view that I did not have any sort of governmental representation in whether or not I should be taxed, and what the level of taxation should be. The question set off some alarms with my employer, and they began to protest that the money taken was a fair tax which provided a host of city services. When I did not buy that argument, and told them I still did not see how I had any sort of representation in determining how fair the tax was or how much I thought was fair, they scrambled to find an answer.

In response to my question, the bank representative told me that my governmental representation authority for the right to levy earnings tax was at the state level. They told me that since I was a resident of Missouri, it was the state legislature which had the governmental authority to allow cities within the state to levy earnings taxes on workers within their jurisdictions. At the time, I let the issue ride. Subsequently, I have had occasion as a resident of Kansas to work in Kansas City, Missouri, and my earnings continued to be taxed the one percent earnings tax by the city of Kansas City. Again the question arises regarding how a city in another state can get away with taxing the earnings of Kansas residents without appropriate governmental representation to determine if I should be taxed, and how much tax is due.

I am sure the response to this would be that the federal government allows state and local governments the right to create taxes for non-citizens, and my representation is on the federal level. Since the slippery practice of being forced to pay taxes to governments where I have no representation in how much or whether I should be taxed is sanctioned by the Federal level of government, cities, counties and states are allowed to dip their fingers into my earnings whether I have a voice or not.

Since taxation has reached a convoluted layer of being taken from earnings, purchases, property, services, and who knows what else, it is time to start asking my Federal representatives to allow me direct representation in all the taxes being drained from my income, or to pass legislation that disallows the practice of taxation without representation as it exists in American society today.

Earnings taxes are just one example of how citizens have been conditioned to paying taxes they have no control or representation in qualifying to pay. How much more money would the average citizen have in their pocket if this country truly held to the original concept of no taxation without representation? My guess is that there would be a lot of state, county, and city officials squirming in their seats if our Federal government forced them to rethink their processes of how people are taxed, and who has a say in determining how much tax is allowed.

To those who suggest that KC voters are the only ones who should be concerning themselves with their earnings tax, I say not so much. Many people are affected by the earnings tax without the opportunity to vote on it, including KC residents who haven’t voted on the earnings tax for decades. Many people would like to see this question revisited.

Yesterday, mayor Funkhouser stood up with Union leaders to say that he doesn’t trust Kansas City voters.  After all, they put him in charge (yuk, yuk yuk).

The actual words that came out of his mouth urged KC voters NOT to sign a petition to give Missourians a vote to give Kansas City voters a vote to either keep on with, or let fade, the erstwhile city earnings tax.

He cited the idea that Kansas City should decide their own issues.  But the petition does JUST that.  Yes, the ballot language goes before all Missouri voters, but the ballot language does not change anything about how KC raises money.  It simply triggers a vote for only KC and St. Louis residents that would allow them to decide their local tax issue, which hasn’t been put to city voters for decades.

So, it appears the voters of Kansas City are intelligent enough to put Mayor Funkhouser in office, and he often appeals to their sensibilities to keep his job, but when it comes to voting to continue or phase out the earnings tax, voters shouldn’t have an opportunity to control THAT part of their city government.

Finally, I’d like to point out some research that the KC Star did:

Annual revenues produced by the earnings tax, originally approved in 1963 at 0.5 percent and increased in 1970 to 1 percent:

1960s

$11 million

1989-90

$97.5 million

1999-2000

$150.5 million

2008-2009

$203.9 million

2010-2011 (projected)

$202.6 million

Sources: City budget and financial records, The Kansas City Star

If you adjust for inflation, 97.5 million in 1990 would be 161.7 million in 2010.  So, as Kansas City earners and businesses have made more money, it seems that Kansas City just keeps it and expands its spending, rather than keeping their budget proportional & returning money to taxpayers and businesses to spend, create or keep jobs and industry.

If the earnings tax did what it was supposed to do and lifted the city’s economic and social health, you’d think the city would need less money over the years, even when adjusted for inflation.  If it isn’t resulting the growth and security that Kansas Citians want to see, they deserve the opportunity to say so, don’t you think?