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City Leaders Prep For Earnings Tax Election, May Ask For Statute Change

Kansas City's one percent earnings tax is up for renewal in 2016.  Since the passage of Missouri ballot initiative “Proposition A” in 2010, Kansas City and St. Louis must submit their e-taxes to the voters for renewal every five years. 

Kansas City voters overwhelmingly voted to renew the tax in April 2011. But uncertainty over whether it will be renewed again next year looms over city budgets and the city's credit rating.

Kansas City reaps around $200 million a year from the tax, which funds almost 40 percent of basic city services.  And the frequent renewal requirement un-stabilizes the city's credit rating. 

Should the rating drop, the cost of governing would go up because the city would have to pay higher interest rates to purchasers of its municipal bonds.

Finance Director Randall Landes says the city exhausted all legal possibilities to get the renewal law overturned by the courts.  And though he believes the ideal solution for the city would be to have no sunset on the earnings tax, he admits that getting the law repealed is unlikely. 

Landes and others at City Hall say, though, that because of the bond interest implications lawmakers in Jefferson City might consider lengthening the time between required renewal elections. Landes says a 20-year renewal cycle would be a good starting point for a lobbying campaign.

That would take the support of the majority of the city council. Landes made his start by pitching the idea to the council's Legislative Committee on October 6.

Even if the idea should make the council's list of state legislative priorities it would face counter-trends in the legislature.

St. Louis billionaire-activist Rex Sinquefield opposes all income taxes in Missouri, and others have floated the idea of eliminating the tax-free status of municipal bonds.

Meanwhile, plans for the required renewal election are proceeding. Should the tax not be renewed at the polls, the law specifies that it would be phased out over a ten-year period.

Steve Bell is afternoon news anchor and business news reporter for KCUR.  He may be reached at 816-235-5173 or by e-mail as steveb@kcur.org

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