JEFFERSON CITY — A Republican-controlled panel of state lawmakers launched the first of a series of hearings Tuesday on the future of ºüÀêÊÓƵ’ earnings tax.
Against the backdrop of the 2024 election cycle, the special committee is seeking alternatives to the 1% tax charged to people who work in the city but live outside the borders.
Committee chairman Jim Murphy, a south ºüÀêÊÓƵ County Republican, said the panel will not seek to end the tax, but find ways to eventually replace the tax or help the city grow its way out of having to assess it.
“It’s not the charge of this committee to take away your tax,†Murphy said. “That is not our intent.â€
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Also on tap is a review into how people who live outside the city but work remotely are being subjected to the tax. That issue is the subject of multiple lawsuits and could go before an appeals court in early 2024.
Tax attorney Mark Milton, who is representing remote workers in the litigation against ºüÀêÊÓƵ, told committee members that refunds were granted to telecommuters before the pandemic. That changed in June 2020 based on a policy implemented by ºüÀêÊÓƵ Collector of Revenue Gregory F.X. Daly.
“The law didn’t change,†Milton said, explaining why he believes the case will be resolved in favor of the remote workers.
Despite annual attacks on the tax by Republicans who control state government, the earnings tax has wide support in the city. In a 2011 referendum, 88% of voters voted to keep the tax in place. In 2016, that number was 72%. In 2021, the tax was supported by 79% of voters.
In all, the tax brought in $206 million in the most recent fiscal year.
Democrats on the panel, as well as Daly, said the revenue is key to paying for multiple city services, including police and fire coverage.
“The earnings tax is the largest source of general revenue for the City of ºüÀêÊÓƵ,†Daly said.
Dissolving the tax would create “serious, long-term harm†throughout the state, Daley said.
Rep. Maggie Nurrenbern, D-Kansas City, said the revenue is critical to funding public safety efforts.
“The folks in these cities want this earnings tax,†Nurrenbern said. “If we take this away, where does that leave public safety in these cities?â€
But Republicans on the panel said there may be alternatives to taxing county residents who work in the city, which has suffered significant population losses in recent decades.
“We’ve got to stop the bleeding,†Murphy said. “We have to look at ways to grow ºüÀêÊÓƵ city.â€
Rep. Tony Lovasco, a St. Charles County Republican, suggested that people outside the city should be able to vote on whether to retain the tax.
But, Mark Stough, a deputy in the collector’s office, said that could entail the untenable situation of allowing people who work in the city but live in border communities outside of Missouri to vote on the tax.
“The City of ºüÀêÊÓƵ should be allowed to self-govern,†Stough said.
While there have been previous attempts to eliminate the decades-old tax, GOP lawmakers have in recent years sought to clarify the law when it comes to people who work remotely outside the city limits.
House Speaker Dean Plocher, a Des Peres Republican who is running for lieutenant governor, led the charge for legislation in the spring that created a new process for people to request a refund of the city’s earnings tax for any work they performed remotely during the coronavirus pandemic.
The measure was approved in the House on a partisan 106-47 vote, but the legislation died in the Senate.
According to a nonpartisan fiscal analysis, the proposal would have cost the city an estimated $66 million in revenue, resulting in less money for police, fire and other city services.
“A loss of revenue of this magnitude would be a devastating blow to the city’s credit and fiscal condition, and would seriously impair the city’s ability to provide basic city services,†the analysis notes.
The panel is expected to meet in the months leading up to the start of the legislative session in January in order to have a plan ready for debate in the full House and Senate.
Murphy said the committee will hold at least one hearing in ºüÀêÊÓƵ before issuing a recommendation for legislative action.