The Show-Me Institute, a Missouri think tank with a libertarian bent, keeps a Mizzou professor on its payroll. The professor, Joseph H. Haslag, has written reports critical of the earnings tax that Kansas City and St. Louis collect. Rex Sinquefield, the Show-Me Institute's wealthy president, is bankrolling a campaign to repeal the earnings tax, which also takes a bite from business profits.
Others think the tax is a sensible way to raise money.
Jack Strauss teaches economics at St. Louis University. He says the earnings tax, the subject of this week's Martin column,
is an optimal method of public finance because it's an efficient,
transparent tax paid by the people who use the services it provides.
"User taxes make sense, right?" Strauss asks.
Haslag, in his capacity as the Show-Me Institute's resident scholar, has argued that the earnings tax drives people away. Strauss is skeptical that the "e-tax" has much of an effect on behavior, however. A business location decision, he says, takes a number of factors into consideration, including the skill of workers and the quality of life. "Taxes are way, way down the list," he says.
Strauss says a better explanation for Missouri's relatively low level of job growth is the lack of financing available to small businesses.
A report by the National League of Cities suggests that Missouri is forward-thinking in allowing Kansas City and St. Louis to collect the 1 percent income tax. Released in 2008, the report put Missouri in a group of "ahead of the pack" states, because municipalities have "sufficient local autonomy" to fund their operations. Kansas City taxes property and sales as well as income.
One Show-Me Institute policy briefing suggested that Kansas City could replace the earnings tax with a tax on land. But Strauss thinks Missouri voters would be unwise to deprive the state's two largest cities of an important revenue source on the hopes another source might emerge. "It's a huge gamble, I would think, to come up with an alternative -- or no tax at all," he says.
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