Sarah Steelman, a Republican candidate for Missouri governor, telephoned me today to tell me that she plans to hold a press conference in St. Louis this week to call on the City to phase out the earnings tax. The municipal earnings tax, which is also collected by Kansas City and by many other cities throughout the country, is a 1 percent tax on the income of workers who live in the City and 1 percent of the income earned by non-residents on work within the City.
Ms. Steelman told me that she thought that the earnings tax discouraged some businesses from moving to St. Louis or Kansas City. (She didn’t mention whether she thought their earnings taxes discouraged businesses from locating in Philadelphia , Baltimore, Pittsburgh, Portland, San Francisco, or other US cities with some sort of municipal income tax.)
I told Ms Steelman that I thought she was correct. I, too, believe that some businesses do choose to keep their businesses in St. Louis county because of the City’s earnings tax. But, I also told her that replacing the third or so of the City’s General Revenue that the earnings tax generates with a tax that falls solely on City residents and City businesses would have a profoundly discouraging effect of its own. I asked her to consider supporting a state income tax credit for the earnings tax.
That would be a good question to ask her at her press conference.