Dump the E-Tax Now

Circumstances have changed, and those who don’t adapt to the new reality are going to suffer. Unfortunately, this city’s leadership, from the Greater Johnson County Kansas City Chamber of Commerce to the dim-witted Star and City Council are clinging desperately to the e-tax, not recognizing that the disruption of abandoning it now is better than the economic suffocation which will result from preserving it.

Renewing the e-tax is short-sighted, unsustainable, and fiscally sentimental.

Make no mistake, I understand the impulse. The earnings tax is a great thing. 55% of the earnings tax is paid by nonresidents, compliance is high, and most is paid in through corporate withholding. I even supported making the tax higher for the wealthy, back in the day.

But times have changed, and Missouri voters have approved a measure requiring that the e-tax be renewed every five years. Abandoning the e-tax – approximately 40% of the city budget – would require either rolling back basic city services to a point that the city would become unlivable, or replacing it with some combination of sales taxes, property taxes, fees for services and heaven-knows what else.

The only “good” news is that if we reject the e-tax in April, we would have 10 years to implement those changes. We can start working on the transition now and face the new economic reality with some degree of self-determination.

On the other hand, if we renew the e-tax in April, we will launch a 5-year frenzy of disinvestment and economic abandonment of Kansas City. What kind of business would even consider investing in Kansas City if no civic leader can guess what the tax structure of the city will look like in the future? “Welcome to Kansas City, we might double the property taxes on your factory, and we might add another 5% to your sales tax, but we don’t know right now” is not a good slogan for bringing new business to our city, or retaining those we have.

What kind of investor would buy a bond from an entity that needs to subject its budget to a 40% pay cut every five years?

I don’t like the economic time bomb that Rex Sinquefield (the funder of the statewide proposition that requires a vote on the e-tax every five years) tossed into our lap, but it’s there now. Even if we get rid of it this time, it’s coming back every five years, and it will eventually go off. Even if, by some miracle, it doesn’t go off, nobody wants to live in a city that faces economic catastrophe twice every decade.

Let’s get it over with and move on.

5 Responses to “Dump the E-Tax Now”

  1. PAT says:

    I agree the E-tax is old and hurts Kansas City, time to move Kansas City ahead.

  2. Nick says:

    Perfectly sensible suggestions. So of course the powers-that-be will do the exact opposite.

  3. les says:

    Or maybe voters will figure out that having 20% of the city budget paid by non-residents, instead of themselves, is a good thing.

  4. craig says:

    Who kidnapped Dan and replaced him w/ a common sense conservative?

  5. Chris says:

    As a resident, I will vote to get rid of the damn thing. We need to have a sales tax on goods and services. Stop with the damn tax breaks to businesses. Across the board. This needs to happen nationwide. If a city or state offers a business tax breaks, said city or state needs to cut that amount from their budget. These businesses when receiving tax breaks are not passing it on by higher salaries to their employees. They may purchase more in the short term but what happens when the tax breaks expire? They leave for the next place that will offer them savings. If we would have reasonable tax rates for all individuals and businesses, and governments spent within those numbers instead of beyond, this would setup a stable base. But the government like a druggie has to have more, any way they can get it.

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