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Missouri House committee recommends St. Louis, Kansas City end earnings taxes

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(The Center Square) – A House special committee recommends lessening and eliminating the earnings tax in Missouri’s largest cities and also supporting a lawsuit against St. Louis.

In 2021, a lawsuit was filed alleging the city of St. Louis didn’t have the authority to collect a 1% earnings tax from nonresidents who were employed by companies located in the city but working remotely outside the city limits during the pandemic. Kansas City refunded earnings taxes collected from taxpayers working remotely during the pandemic. The lawsuit was the first item mentioned in a media release Wednesday reporting on the committee’s recommendations.

“Support the legal action in Mark Boles, et al., vs. City of St. Louis, advocating for reimbursements to plaintiffs due to improper application of the 1% tax on remote work,” the release stated.

The committee also suggested phasing out the earnings tax but linking it to predetermined revenue increases. It recommends ended a 10% reduction in the earnings tax until it’s eliminated.

“Any legislative proposals to scale back or eliminate the local earnings tax without proposals to replace this revenue are proposals to gut fire and police services, street maintenance and upgrades, parks, the courts, the Circuit Attorney’s office, and much more,” Nick Dunne, the public information officer for St. Louis Mayor Tishaura Jones, wrote in an email to The Center Square. “There is no evidence indicating St. Louis’ 1% earnings tax presents a barrier to economic or population growth.”

The committee, formed last summer, was charged with reviewing the earnings tax in municipalities. In September, Speaker Dean Plocher, R-St. Louis, requested the committee also examine personal property tax policies.

The committee recommends indexing the earnings tax to exempt low-income workers, defined as those making less than $21,870, or 150% of federal poverty guidelines.

The committee also recommends earnings tax exemptions for new residents and creating “Earnings Tax Opportunity Zones” to incentivize population and business growth in Kansas City and St. Louis.

“These proposals aim to promote fairness, relieve burdens on low-income workers, and encourage economic growth,” Rep. Jim Murphy, R-St. Louis, and the committee chairman, said in a statement. “I believe these recommendations mark a significant step towards creating equitable and sustainable taxation policies.”

The committee recommends action to close loopholes allowing school districts, counties and local governments from evading regulations in the state constitution and laws. In an interview with The Center Square last year, Murphy mentioned the Mehlville School District’s voter-approved 31-cent increase to the property tax rate. The state’s Hancock amendment limits tax increases to the lower of the inflation rate or 5%. However, the rise in home values led to millions in additional tax revenue for the school district.

The committee recommends extending the time for county assessors to file documentation on property valuations and for taxpayers to appeal assessments. They also suggest more direct communication between county assessors and taxpayer-homeowners to increase accuracy of assessments.

“We look forward to further discussions and collaborations with our colleagues this session to enhance our understanding of these issues and refine our proposals for the benefit of all of our communities,” Murphy said.

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