Kansas Citians chose to renew the earnings tax on April 6. Photo by Bill Rankin

The Earnings Tax: To renew or not to renew

“As we begin to recover from the pandemic, it’s crucial that we protect jobs and our basic city services like snow removal, street repairs, and police and fire services.”

By John Sharp

Kansas City voters will decide whether to again renew the city’s 1 percent earnings tax on wages earned by city residents and persons who work in the city but live elsewhere and on net business profits for businesses located in the city or doing business here.

Kansas City Question 1 will renew the tax for five years starting on January 1, 2022, if approved by a simple majority of voters.

The earnings tax is the city’s largest single source of revenue, bringing in $277.3 million in fiscal year 2018-19, the last fiscal year before the downturn in the economy caused by the CORONA-19 pandemic began to be felt.

Historically, about half of earnings tax revenue comes from persons who work in the city and use city facilities and services while here, but live in surrounding Kansas and Missouri portions of the metropolitan area.  Visiting professional athletes also are assessed the tax on their earnings while playing here.

Last fiscal year, 18 percent of earnings tax revenue came from net business profits.

Retirees whose sole income is from pensions or Social Security do not pay the tax.  Persons receiving disability or unemployment payments also do not have to pay the tax on those payments.

If the earnings tax is not continued, the city would be forced to propose large increases in property and sales taxes to offset some of the loss in revenue.  Property tax increases would place a heavier proportionate burden on city residents than the earnings tax does, and regressive sales tax increases would place a proportionate heavier burden on city residents with lower incomes.

Even if the city could get voter approval for such large tax increases, and state legislative approval also would be necessary to even propose some potential increases in other taxes, the city would still likely have to layoff significant numbers of city employees including first responders and other public safety personnel given the magnitude of the revenue loss.

This would result in longer emergency response times and drastic reductions in other essential city services such as street maintenance and trash collection.

The campaign for continuation of the tax has brought together scores of business, labor and community groups as well as elected officials who are often on opposite sides of political issues.

“The earnings tax helps us take care of our neighborhoods and keep our community working.  I am proud to stand alongside neighborhood, labor and business leaders across Kansas City to support its renewal,” said Kansas City Mayor Quinton Lucas.

“As we begin to recover from the pandemic, it’s crucial that we protect jobs and our basic city services like snow removal, street repairs, and police and fire services,” Lucas said.

In south Kansas City, the earnings tax extension also has been endorsed by the South Kansas City Alliance, South Kansas City Chamber of Commerce and Southland Progress.

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