Friday, May 16, 2014

The (sales) tax man cometh for Kansas City, Missouri, voters [updated]

Posted By on Fri, May 16, 2014 at 10:10 AM

click to enlarge 1100px-Downtown_from_Top_of_Liberty2.jpg
Ever get the feeling when you're buying a six-pack of longnecks and a bag of potato chips that the final bill is more expensive than it used to be? Then take another look at the receipt and consider the sales tax you're paying in different parts of town.

Kansas City's base sales-tax rate is supposed to be 8.35 percent, which includes the state sales-tax rate.

But go to dozens of places around town to do your shopping, and that rate increases through the use of sales-tax schemes like community-improvement districts and transportation-development districts. Some places, like downtown Kansas City, have two TDDs layered upon each other. And unless you're adept at manipulating handy online maps before you go shopping, it's difficult to know when you enter a CID and leave another.

So a $5.29 sixer of Miller High Lifes at Brookside Wine & Spirits comes up to a final bill of $5.73. That price tag grows to $5.84 if you buy the same beers at the same price downtown, where the sales-tax rate in some places is 10.35 percent. The 11-cent difference doesn't seem like much for just one trip to the beer store, but the incremental increases add up over time. But people tend not to make a big deal about sales-tax rates.

It's with that thinking in mind that local and state governments are asking for sales-tax increases with growing frequency. And often they're counting on those sales taxes to pay for basic city services, things that ordinary sales and property taxes should support. In some cases, like the streetcar project, the sales tax would pay for what now is a semi-speculative economic-development bet.

A series of decisions at City Hall and the Missouri General Assembly this week mean that Kansas City voters have to decide on three sales-tax measures facing them at the ballot box later this year.

The Missouri General Assembly will have voters deciding on whether to approve a three-quarter sales-tax increase statewide to fund transportation needs, primarily roads and interstates. That will go on the November midterm ballot. 

Prior to that, Kansas Citians will vote in August on the first of two elections to approve a streetcar system expansion. If the August vote passes, a second election on approving a one-cent sales-tax hike will ge before voters in November. But that same August ballot will also ask voters for a quarter-cent sales-tax extension to benefit the Kansas City Fire Department. To be clear, the fire sales tax is not an increase but an extension of an existing tax. But it is another tax proposal among three this year, and certainly more to come in the future.

If all those sales-tax measures pass, the downtown Kansas City sales-tax rate will grow to 12.1 11.1 percent. [As @downtownkc points out on Twitter, the streetcar expansion vote wouldn't add to the existing streetcar sales tax downtown, so the downtown sales tax could go as high as 11.1 percent by the end of the year. Other places, like the Plaza, however, could still see the sales tax exceed 12 percent.] Suddenly the champagne of beers costs $5.93. Or a $110 chair at Retro Inferno would cost $122.21.

At the same time, cities like Kansas City award tax breaks to large companies that can slow the growth in tax revenues. On Thursday, the same day that a Jackson County judge approved the forthcoming elections on the streetcar project (which includes a sales-tax increase), the City Council approved tax incentives and property-tax abatements for Burns & McDonnell's expansion in south Kansas City. Burns & McDonnell is a $2 billion engineering firm that will keep $41.9 million worth of earnings taxes to demolish the old Congregation Beth Shalom campus and replace it with a new corporate building to house 2,100 new employees. 

No doubt those employees will buy gas, lunch and other sundries in Kansas City. But the deal can stunt revenue growth for the Center School District, which would see more of an increase in revenue had there been no incentive package offered to Burns & McDonnell. The Mid-Continent Library actually stands to lose money, according to one analysis.

City Hall rationalizes these incentive deals by saying they boost the local economy and expand the tax base. But if that's true, then why do all these tax proposals keep coming up?

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