What's At Stake In The Earnings Tax Vote? Maybe More Than You Think

Mar 22, 2016

The first time Kansas City Mayor Sly James says something to me about the earnings tax, it’s right after Thanksgiving.

I’ve already turned off my recorder, and we’re chatting as I pack up my equipment. I ask if he has plans for birthday (he turned 64 on Dec. 9).

"Oh," he tells me, "I have to go to a fundraiser for the earnings tax campaign."

"Gee, you sure know how to party," I reply.

In the months since, I’ve talked to James about the earnings tax probably a dozen times.

“There are no good options without this tax,” he’ll say. “The people in this city have voted for this earnings tax.”

Opponents link earnings tax to TIF

For the uninitiated, the earnings tax is a 1 percent tax on anyone who lives or works in Kansas City. It brings in about $230 million in revenue annually. The money goes into the general fund, and it’s used to pay for things like police, fire and trash pickup. Missouri law requires a renewal vote every five years.

Some lawmakers want to abolish the earnings tax. But it’s pretty popular here, where 78 percent of voters approved it the last time it was on the ballot, in 2011. Kansas Citians are unlikely to reject the earnings tax because if they did, they’d lose revenue from commuters coming into the city.

“It seems like city officials want to catch people as they’re heading out the door,” says Patrick Ishmael of the Show-Me Institute, a Libertarian-leaning free market think tank that generally sees taxes as barriers to economic growth. “The way the city ... relies on this way of getting taxes is to get people who don’t live in the city to pay for services in the city, I understand the appeal of that. The problem is that only works so long as you can keep the businesses in the city.”

The question of who should pay Kansas City’s earnings tax isn’t new. People who work here but live elsewhere have grumbled about the tax for years.

But this election cycle, opponents have a new argument. Ishmael says he’s opposed to corporate welfare, which is what the Show-Me Institute calls the tax increment financing deals the city strikes to incentivize developers to come here.

“What ends up happening is the city gives away north of $100 million dollars a year, and says, 'Well, we need the earnings tax,' then takes away money out of the east side, or the old Northeast to subsidize property on State Line Road or downtown,” Ishmael says.

Cut TIF, he says, trim bloat, and the city wouldn’t need to double the sales tax or triple property taxes or any of the other dire predictions the mayor’s been making.

Development incentives prove divisive

Against the backdrop of the earnings tax campaign, opposition to TIF has been growing. At an NAACP forum last month, James fielded several questions about how the city awards incentives.

“We’re not taking money out of the bank,” James tells the two dozen or so people who show up to the Bruce R. Watkins Cultural Center. “We’re taking money you’re going to generate and saying, ‘You can keep part of it in order to offset your expenses.’”

James gets angry at the forum. He’s pissed that a St. Louis billionaire, Rex Sinquefield, is funding a massive campaign to get rid of the earnings tax.

“You don’t hear these ads on the country music stations,” James says. “You don’t hear these ads on the rock and roll stations. The only place you hear these ads is on the black stations.”

Meanwhile, James says the reason he’s bending over backwards for some of these companies is because they can bring good jobs to Kansas City.

“Because the thing I hear on the east side more than anything else is we need jobs,” James says.

A woman in the crowd stands up.

“But they’re not hiring us,” she says.

Margaret May is with the Ivanhoe Neighborhood Council. She disagrees the earnings tax doesn’t help Kansas Citians east of Troost.

“People in the neighborhood, especially the center part of the city, probably utilize the services that come through the earnings tax more than anyone,” May says. “There’s a greater need for the trash removal, for the police services and all.”

For lower income workers, the earnings tax isn’t a bad deal. A person working full time at the minimum wage earns a little more than $15,000 and pays the city about $150 a year. I called a couple of trash haulers and couldn’t find service for less than that.

Not to mention the earnings tax makes up the bulk of funding for police and fire. By the city’s estimation, 800 police officers and 500 firefighters would have to be laid off if the earnings tax doesn’t pass. May says cuts to public safety would roll back the progress her neighborhood’s made in recent years.

“I just think we can’t expect to have a good city for free,” May says.

Help for the east side

A few days after the NAACP forum, I catch up with James again. We’re standing outside of city council chambers, where he’s just proposed a new fund that could help with east side development. I ask him if he thinks this will quiet some of the criticism about how the city awards incentives.

“I have no idea,” he says. “I have no idea.”

The council will debate the Shared Success Fund this week.

But to this reporter, it’s starting to feel like Kansas Citians will vote April 5 not just on the earnings tax, but on what kind of city they want moving forward.

Elle Moxley is a reporter for KCUR. You can reach her on Twitter @ellemoxley.