JEFFERSON CITY — ºüÀêÊÓƵ would have to pay refunds to people who were charged the city’s earnings tax while they worked remotely under a proposal advancing in the Missouri House.
Members of the House Workforce Development Committee voted 8-3 Monday to send the measure to the full House for further debate, despite concerns that the move would have significant negative consequences for the city.
“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,†a fiscal analysis by the governor’s budget office notes.
The vote was split along partisan lines with the three “no†votes all Democrats. Rep. , R-Ballwin, who is running to become the next ºüÀêÊÓƵ County executive, is sponsoring the plan.
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Remote work has been in the spotlight over the past two years as people have stayed away from offices and other places of business during the coronavirus pandemic.
The fiscal analysis shows that 37% of the city’s workers live outside of the city. Another 5.8% work in the city but reside in Illinois.
All told, the 1% tax brought in $156 million to ºüÀêÊÓƵ coffers in the 2020 fiscal year. Of that, the analysis showed that altering the collection to accommodate for remote work would reduce the tax by $67 million.
In earlier testimony to the panel, Matt Moak, deputy counsel for the city, said ºüÀêÊÓƵ would not be allowed to offset a reduction in tax revenue with federal relief funds.
Others opposed to the change include firefighters, who receive a portion of their funding through the earnings tax.
The Missouri Municipal League also weighed in, saying ºüÀêÊÓƵ would have to find another tax or fee to increase to replace the lost revenue. In addition, they said workers could be liable for tax fraud if they miscalculate their taxes.
Dogan’s legislation marks the second time in two years that lawmakers have sought to exempt remote work from the earnings tax.
The sponsor of last year’s proposal, Sen. , R-Manchester, called it “egregious†that his constituents in ºüÀêÊÓƵ County are being taxed “even though they never set foot in the city of ºüÀêÊÓƵ.â€
The latest legislation comes as AT&T sued ºüÀêÊÓƵ Collector of Revenue Gregory F.X. Daly in January, alleging the collector’s office improperly imposed the city’s separate 0.5% payroll tax on employees who neither live nor work inside the city limits.
It’s the first known lawsuit brought by an employer challenging collection of the city’s payroll tax during the pandemic. The payroll tax produces a sizable stream of revenue for the city, about $40 million in this current fiscal year, or 8% of the city’s general fund.
The company’s lawsuit follows a similar legal challenge filed last year over the earnings tax. A ºüÀêÊÓƵ judge dismissed most of that lawsuit, which sought class-action status, saying individual taxpayers need to pay taxes under protest and file their own appeals under Missouri tax refund statutes.
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Originally posted at 1:45 p.m. Monday, Feb. 14.