Tuesday, March 25, 2008

KC to Increase Earnings Tax?


Tonyskansascity has posted a rumor that KC government officials may be considering increases to the city's earnings tax as a way to generate more revenue and meet the city's budget shortfall. Currently businesses, residents, and non-residents working in the city are taxed 1% by the city on their income over and above what the state and federal government taxes.

Tony's take on the proposed tax increase is that it would be good for the city; that it would get JoCo residents to pay their fair share. What Tony seems to be forgetting is the negative impact such an increase would have on businesses and jobs in the city.

Already KC finds it extremely difficult to attract new businesses and conversely new jobs to Kansas City. One of the primary reasons for this is KC's 1% earnings tax. Take for example companies like Garmin and Sprint who chose to put their global headquarters in the Kansas City area. They didn't choose the city, they chose outlying suburbs like Overland Park and Olathe. It doesn't take a psychic to see that increasing the earnings tax would make the process of attracting new businesses that much more difficult.

Worse yet, there is strong evidence that KC's earnings tax is pushing middle- and upper-income residents out of the city. A recent report by KC policy analyst Joan Pu (insert bodily excretion joke here) found that KC's share of personal income for the entire metro area has been steadily falling. The report also states that although the population of the entire metro has been steadily increasing, the city's has remained flat.

One can tune in to any local call-in radio show and hear scores of area residents proclaim their disdain for the city's earnings tax. Many site the tax as the very reason they no longer live nor work in the city.

There is no doubt that something must be done to correct the city's budget imbalance, but increasing taxes is just not one of them. Supply-side economics shows that if the city were to lower, or better yet remove the earnings tax, it would spur economic growth leading to more sales and property being collected by the city. It would also remove the major disincentive to living or working in the city, which just might give the city a real shot at filling all those empty lofts downtown. But this is a long term fix and the city needs one in the near term.

The mayor and the city manager have both urged cuts. The city manager wants to fire approximately 200 city employees and the mayor wants to cut fledgling projects like the zoo and some of the art galleries and museums that sit largely unused by the public.

Clearly spending cuts need to be made and starting with staffing is a good idea, but perhaps Mr. Cauthen should be looking at many of his under qualified and over paid appointees before going after the city's lesser paid employees.

Closing the zoo seems in appropriate as well, but there is no doubt that the zoo is being mismanaged. It's far too spread out and not really conducive to single day trips. Leaving area animal lovers more likely to travel to Topeka or St. Louis for a better experience. So maybe closing it wouldn't be such an awful thing if the area was dedicated to using it as an opportunity to bring in a new, more attractive zoo in the not-so distant future.

The city would also do well to stop building things we already have... i.e. the Sprint Center. We keep hearing what a resounding success it has been by proponents of the project, but they seem to ignore that arena isn't any bigger than Kemper. That any event that has been held in the Sprint Center could have just as easily been held at Kemper. The new arena hasn't attracted any new teams to the area, as promised, and the longer it sits without an anchor tenant the more unlikely it will ever get one.

The P&L has been rife with broken promises and is far behind schedule and revenue projections. Despite all this, the mayor still believes spending more TIF money for a soccer complex, a sport that is anything but popular, in the blighted Bannister area is somehow going to buck the trend.

If they look a little harder, Funkhouser and Cauthen kind find ample cuts in the KCMO school district. They are currently paying two people superintendent salaries, yet only one is actually doing the job. The district has one of the highest per student costs, but performs as one of the worst in the nation.

The city can also generate more revenue by getting multi-billionaire team owners to pay their fair share of upkeep and upgrade costs for the stadiums they inhabit at the city's expense. For instance, why do the Chiefs get the revenue from the annual Border War showdown, a football game between KU and MU, if the city owns the stadium? Should that revenue not go to the city?

There are clearly better options available for the city to overcome its budget shortfall than raising the antiquated earnings tax.

2 comments:

Anonymous said...

To paraphrase an old saying, if you want less of something, tax it.

So if KC wants less businesses and productive citizens, then tax them. Over time both will slowly leave.

Anonymous said...

I CAN'T STAND TO LIVE IN KANSAS CITY! I can't scream it loud enough. I have to stay for now because of obligations to my aging parents, but I've even told them: once you're pushing up daisies, I'm pushing my belongings to Gladstone, Kearney, or Excelsior Springs.

I'm so sick of being taxed to death so I can support the poor. That's the majority of who lives in Kansas City anymore. Sure there are others, but KC has become the anti-average-joe in favor of spending big dollars on those who are still on the city's nipple and dumb building projects. Hell, they won't take all my trash, there's been dozens of water main breaks in my neighborhood ALL WINTER LONG, the Northland Police are understaffed (as voiced by a Northland Police Officer), they want to charge me money to own a dog yet they won't get the strays off the streets, and then slap me in the face by wanting to waste more of my money.

Let them hike their Income Tax all the way to 100%. Soon it won't be my worries anymore. Only the sorry saps who stay behind and those getting rich and fed off of it.