Earnings Tax

[aknowledgeableperson]

What strikes me about this is they put a tax of $15,000 per acre and had a total over $1.5B to be collected.  The current property taxes bring in way less than that.  Makes you wonder what the property tax raises in the 3rd district with its high amount of substandard housing let alone commercial property.

[bahua]

Land tax should not be compared to any other tax, because it doesn't work like any other tax. But for the purpose of this proposal, the question that should be asked is whether the money brought in would offset the amount lost through getting rid of the earnings tax.

[ComandanteCero]

I think the land tax idea is pretty great (particularly a two tiered system, as proposed in the study).  Here's a quote of myself from a couple years back in an old thread (side note: i used to know more about it.  For some reason a lot of that knowledge has leaked away):

I don't know about making land tax the only taxation system, but I do think a two-tiered taxation policy of land and built structure at the city/regional level would be a good thing (with the land portion proportionally bigger than that of the building).  This wouldn't mean more taxes, just means you are taxed for the site value of the land you are sitting on rather than the quality of your building.  (Site-value is the value derived from the location or site of the land with regards to how close it is to existing public investments (sewer, water lines, streets) and the socially created values (or "the aggregate of private human activities that go on around it").

There are a couple of cities that actually have this kind of taxation system in place (Pittsburgh and Harrisburg, Pennsylvania are among them).  Pittsburgh has had a watered down version since 1913, but never really bothered to give it bite cause it would anger the steel barons who had massive estates, so thats how things went till 1979 after the steel industry collapsed.  That year the city as an act of desperation to save the city "decided to increase the tax significantly on site value while lowering the tax on buildings.  Results were impressive.  For the three-year period afterward, building permits issued in the city increased 293 percent compared to the national average.  The city then shot itself in the foot by instituting a local wage tax".  hehe.  Edmonton, Canada  instituted a plan in 1904 that completely exempted buildings from taxation and relied solely on land.  It was a growing city at the time, so that it "quickly developed a dense downtown core, considered by many to be an exemplary excercise in civic design.  Unfortunately, in 1918, to mitigate fighting in WW1, they city slapped a 60 percent tax on the value of buildings, instead of simply increasing tax on site value".

Anywho, i think if KCMO instituted that kind of tax we'd have a good amount of properties suddenly go for sale, and a lot less McD with big parking lots.  Needless to say dense development would be much much more likely.

An issue that comes to mind, is that part of the earnings tax money comes from people who work in KCMO, but don't live there (i.e my dad (who, btw, doesn't mind the e-tax).  If KCMO eliminated the e-tax, all the tax revenues would have to come from within KCMO borders.  Somehow, I think someone has to end up paying more.  Then again, we'd have to look at just how much the e-tax brings in.

[ComandanteCero]

here are some figures from the Star article:

The 1 percent tax on income that Kansas City currently charges residents and workers in its city limits is its largest single source of tax revenues, raising a projected $177.8 million in revenues or about 16 percent of the city’s revenue stream in its current fiscal year, according to budget figures on the City Hall Web site.

Business activities, such as running the airport and water and sewer companies, are projected to contribute $248 million in revenues, with the balance of the expected $1.08 billion stream coming from an assortment of taxes and fees.

Haslag’s study calculates that Kansas City could replace the earnings tax money entirely by cutting it gradually, to 0.5 percent in one year, to 0.25 percent in six years and to zero in 10 years, and imposing a 4.3 percent tax on land values initially, raising that to 5.7 percent in seven years and to 6.7 percent in 12 years.

Land taxes, which don’t reflect the value of buildings or other improvements as traditional property taxes do, are based on a conservatively estimated $15,233 per acre land value, or about $1.5 billion for an estimated 100,000 acres of taxable land in Kansas City’s 313.5-square-mile area, the report said.

[bahua]

I do think it's important that places with high land value(ie: downtown, midtown, Plaza, South KC, etc) be actually assessed differently, or the system would lose a lot of its utility. That would allow things like surface lots in downtown to be taxed the same as a surface lot in Waldo, making them perfectly viable, which they are not.

[kard]

So does this kind of tax apply the same level of tax to land in the CBD as well as farm land?

[Maitre D]

I always wondered if the City would allow me to take my 1% earnings tax, and apply it towards retail in the city.  I.e., "You can either pay it to us, or you can shop on the Plaza/stay at a hotel DT overnite, etc"

It would cut the city's immediate take by 2/3, but would increase retail sales, and probably make more retail move into the city limits, thereby raising biz activity, raising sales taxes in general.  I dunno...

[bahua]

So does this kind of tax apply the same level of tax to land in the CBD as well as farm land?

Okay, I just read the report more deeply and determined that Haslag is advocating individual assessments of land values. That means that undeveloped farmland and dense urban land would not be assessed the same.

[kard]

Okay, I just read the report more deeply and determined that Haslag is advocating individual assessments of land values. That means that undeveloped farmland and dense urban land would not be assessed the same.

Well, I don't see how it could be.  Farmland does not produce as much revenue per acre as a retail shop or corporate headquarters.  You couldn't expect a farmer to pay the same tax on 500 acres as a home owner pays on a small lot, right?

[bahua]

Well, I don't see how it could be.  Farmland does not produce as much revenue per acre as a retail shop or corporate headquarters.  You couldn't expect a farmer to pay the same tax on 500 acres as a home owner pays on a small lot, right?

Certainly not, but that sure is how the Star makes it sound. Looks to me like they've made up their mind on it. And when you can't dispute something with facts, you dispute with FUD.

[kard]

Well, I'm guessing they'd break it up by zoning.

If not then the Northland may as well declare bankruptcy now.

[ComandanteCero]

yeh, some of the articles are describing something different from what I originally thought was a land tax.  They make it sound like it's a flat tax based entirely on the amount of land you have, regardless of location (i.e just taking the total land area of the city, putting a figure on what the land is worth,and dividing into acres).  My understanding was that you paid more depending on your location and proximity to amenities and infrastructure.

[bahua]

Well, I'm guessing they'd break it up by zoning.

If not then the Northland may as well declare bankruptcy now.

Zoning works against a free economy anyway, so it would naturally not go very well with a land tax.

Regarding what we've been told by news outlets, it looks to me like the Star opposes it, and is trying to paint Haslag as a radical wacko.

My advice is to read the report. It's excellent and very thorough.

[kard]

Sensationalism 101:  Find a bunch of officials who haven't seen the report or who aren't familiar with the details of it and ask them if they think it's a good idea.

And here's what you get:

Officials cool to tax shift
By GENE MEYER
The Kansas City Star

Home and business owners would pay more and commuters would get off virtually scot-free if Kansas City revamped its tax structure as a think tank proposes, government experts said.

http://www.kansascity.com/mld/kansascit ... 583713.htm

[dangerboy]

I do think the issue of commuters is valid.  Right now they account for 30% of the earnings tax.  If we switch the taxing structure not only do we have to make $200 million from the earnings tax, we have to shift 30% of that total back to KCMO residents.

[kard]

It's valid, but the E-tax is also an issue people are hesitant to work / live in the city in the first place (or one people list, at least).  It would take time to get used to a new tax system like that.  I think 10 years is even a little short.

[bahua]

The city would make more with a land tax than any numbers have indicated. Many, many times more than the earnings, property, or sales tax kitties.

The fact that it doesn't stifle prosperity like the big three taxes- that it in fact encourages prosperity, means that it creates a bigger economy to tax.

[dangerboy]

The earnings tax is a red herring.  It's not stopping people from moving into the city.  If it was, KCMO wouldn't be building more houses than Olathe, Overland Park, and Lee's Summit combined.  The Northland wouldn't be growing fast than Johnson County or Lee's Summit.

Most of the people I've met that blame the earnings tax probably wouldn't move into the city anyway.  It's a convenient excuse to stay in the suburbs without talking about real reasons like crime, density, minorities, etc.

[kard]

The city would make more with a land tax than any numbers have indicated. Many, many times more than the earnings, property, or sales tax kitties.

The fact that it doesn't stifle prosperity like the big three taxes- that it in fact encourages prosperity, means that it creates a bigger economy to tax.

If the city is making more revenue then that means its residents are being taxed more, right?

In other words, taxes are being increased, right?

[dangerboy]

If the city is making more revenue then that means its residents are being taxed more, right?

In other words, taxes are being increased, right?

Not necessarily.  Look at property taxes.  The rate can stay the same, e.g. 10%, but as property vales to up the amount taxed increase.  Same with income taxes.  The rate has stayed constant at 1%, but as incomes rise the tax generates more money.  So the net tax paid goes up even the tax rate isn't raised.