Earnings Tax

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staubio
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Earnings Tax

Post by staubio »

I know that the earnings tax is a point of contention for a lot of people and the reason that a lot of people have a beef with Kansas City, MO.  I don't have as much background on it as I'd like.

Why is the e-tax necessary?  What funding source is lacking in KC that requires it to use an e-tax when other cities don't, or is it really just an extra tax?  What other cities have e-tax?  What additional services/benefits does the tax provide, besides trash pickup?

I'll continue to research this but I'm curious what the thoughts are here.

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Re: Earnings Tax

Post by Joe KC »

St Louis has one; New York has a fairly onerous one, IIRC.  I would bet most big cities have an income tax - just another revenue stream.

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Re: Earnings Tax

Post by bahua »

The KC earnings tax is a massive entitlement for the city. Whether it is done to compensate for holes in other areas is irrelevant. They tax our earnings, because they can.

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Re: Earnings Tax

Post by lock+load »

bahua.....how do you believe cities should generate revenue?  You are opposed to the property tax, and it appears the income tax as well.

Detroit has an income tax, as do many cities in Ohio.  NYC's rate gets up to 5-6% I believe.

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Re: Earnings Tax

Post by kcdcchef »

staubio wrote: I know that the earnings tax is a point of contention for a lot of people and the reason that a lot of people have a beef with Kansas City, MO.  I don't have as much background on it as I'd like.

Why is the e-tax necessary?  What funding source is lacking in KC that requires it to use an e-tax when other cities don't, or is it really just an extra tax?  What other cities have e-tax?  What additional services/benefits does the tax provide, besides trash pickup?

I'll continue to research this but I'm curious what the thoughts are here.
every city i have ever lived in has an earnings tax. kansas city, out of ALL the cities i have lived in, had the smalles earnings tax, by far. 1% is jackshit.

here in the burgh, it is 3%.
lock&load wrote: NYC's rate gets up to 5-6% I believe.
6%. try swallowing that pill on every check.
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Re: Earnings Tax

Post by bahua »

lock&load wrote: bahua.....how do you believe cities should generate revenue?  You are opposed to the property tax, and it appears the income tax as well.
I am a rabid land tax advocate. If you want more information, use this site's horrible search function to find it any of the zillions of mentions I've made of it before. If you can't find it, I'll see if I can find it for you, because I don't really feel like writing it all out right now.

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Re: Earnings Tax

Post by lock+load »

bahua wrote: I am a rabid land tax advocate. If you want more information, use this site's horrible search function to find it any of the zillions of mentions I've made of it before. If you can't find it, I'll see if I can find it for you, because I don't really feel like writing it all out right now.
So a land tax and nothing else?  I think an income tax is preferrable to many other taxes.

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Re: Earnings Tax

Post by bahua »

Yep, nothing else. The city would get all the money it needs, and far more, with a simple land tax.

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Re: Earnings Tax

Post by staubio »

lock&load wrote: So a land tax and nothing else?  I think an income tax is preferrable to many other taxes.
I'm pretty much with bahua on the land tax.  I don't have any problem with income taxes except for the fact that they have the unintented consequence of discouraging additional income.  In the sake of property taxes, it discourages the improvement of property and supports holding vasts amounts of productive land and doing nothing with them.  If I want to make my building nicer, I'll have to pay more as a result.  We should encourage that kind of sterwardship, not tax for it.

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Re: Earnings Tax

Post by bahua »

You're offtopic, staubio. Now answer staubio's question!

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Re: Earnings Tax

Post by KCMax »

Just a wild guess, but I would think to support anything close to the current level of government services, to eliminate all taxes except property would skyrocket property tax to well over 50-60%.
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Re: Earnings Tax

Post by bahua »

Land tax, not property tax. There's a world of difference.

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Re: Earnings Tax

Post by lock+load »

staubio wrote: I don't have any problem with income taxes except for the fact that they have the unintented consequence of discouraging additional income.
Do you know anyone that avoids earning additional income because of the income tax?  I don't.  60% is still more than zero.

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Re: Earnings Tax

Post by Joe KC »

staubio wrote: I don't have any problem with income taxes except for the fact that they have the unintented consequence of discouraging additional income. 
Maybe that's true in an economics textbook...but come on.  Nobody ever passed up the chance to make more money because it would cost them 1% (or 33%, or whatever) in taxes.  Maybe this happened in the 1950s or whatever when the top income tax bracket was like 80%.

The land tax seems like a good idea, but I would still like to see the earnings tax continue.  I think a blended approach to taxation/revenue keeps the system stable.

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Re: Earnings Tax

Post by bahua »

Joe KC wrote: I think a blended approach to taxation/revenue keeps the system stable.
I disagree, as all other taxes we use are regressive, and discourage the very activities that power our economy.

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Re: Earnings Tax

Post by KCMax »

bahua wrote: Land tax, not property tax. There's a world of difference.
I see, but I think my point still stands. I like attempts to make taxes simpler, but anytime you simplify it to the point where only one activity is taxed and that is used to support our entire government, the revenues needed are so great that the taxes needed to be levied will be prohibitively onerous to the point of discouraging anyone from that activity. Here, I can't see anyone wanting to own land if taxes are over 50%.

And if your answer is simply to reduce government spending, that's fine, but you'd better have something in mind more than eliminating a few agencies.
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Re: Earnings Tax

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lock&load wrote: Do you know anyone that avoids earning additional income because of the income tax?  I don't.  60% is still more than zero.
True, but there's more here then just where the place of employment is located.

Even if you live in KCMO but work somewhere else, you have to pay the E tax.  Someone working in Kansas and could potentially get a nice bump if they moved from Missouri to Kansas.  That not attractive for new residents.
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Re: Earnings Tax

Post by Joe KC »

bahua wrote: I disagree, as all other taxes we use are regressive, and discourage the very activities that power our economy.
Again, maybe in theory, but I don't think a 1% earnings tax discourages anyone from drawing income.  The demand for income is almost perfectly inelastic.

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Re: Earnings Tax

Post by lock+load »

Joe KC wrote: Again, maybe in theory, but I don't think a 1% earnings tax discourages anyone from drawing income.  The demand for income is almost perfectly inelastic.
If we are arguing the KCMO e-tax in the context of other municipalities of this region, one may choose to work or locate elsewhere to avoid the tax.  People do it all the time, moving to state with no income tax, etc.

However, once in a location, no one, literally no one, will skip work because a portion of it will go to the income tax.  It just doesn't happen.  And if it does happen, I pity the fool who made that decision.

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Re: Earnings Tax

Post by GRID »

The day KCMO loses their E tax is the day the city is permanently bankrupt.  It's not going away.

They are typically created when towns become fragmented and residents and the revenue they are associated with leave for other areas of a metro.  KCMO maintains infrastructure for a much larger city than its residents can sustain, even with the etax.

To give an example, KCK spent 200 million on the fairfax plant to boost their economy only to find out that a vast majority of the people that work there and all the feeder businesses that support GMAC do not live in KCK, but JoCo and MO, so they are thinking of enacting an etax.

That's basically a simple version of why KCMO did it and many large urban cities do it.

How does a city maintain roads like the Paseo after everybody has left and still build new ones, all the while mainting stadiums, convention centers etc, while, most of the affluent population lives in another city, or in KC's case, another state?

Etax goes a long way in filling some of the gap.

Move to a suburb to avoid the etax?, that's ridiculous, especially since most of KC's suburbs have higher taxes, especially when you look at the entire tax package from sales taxes to property taxes to gas and water taxes.

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