Proposed end to state income, city earnings taxes would jeopardize state’s basic social services

BY GAIL WECHSLER

Currently there are several bills before the Missouri Legislature that would dramatically change the taxation system in our state, including SJR 29 and HJR 56. At the same time, there is a petition drive throughout the state to gather petitions for a ballot measure that would eliminate the earnings tax in both St. Louis City and Kansas City. Should the changes sought by the petition drive take place, there also would be drastic changes resulting for the City of St. Louis.

The Jewish Community Relations Council (JCRC) is concerned that our government have the resources to adequately fund essential social services to those in need and to maintain the economic health of the community. Both the efforts to eliminate the income tax and to eliminate the city earnings tax would undermine the government’s ability to fund basic services and would impose an undue burden on those least able to pay.

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At the March 2010 meeting of the JCRC Council, JCRC Constituent Agency The National Council of Jewish Women-St. Louis Section (NCJW) proposed a resolution urging the JCRC to oppose the House and Senate bills that would eliminate the income tax and replace it with an expanded sales tax. The resolution also asked that JCRC oppose efforts to eliminate the earnings tax. The resolution, presented to the Council by NCJW State Public Affairs Chair Darien Arnstein, passed unanimously.

The Jewish community is especially concerned about those living in poverty, those who have disabilities and seniors on fixed incomes. They are the ones who will suffer the most if state taxes were based on sales and services rather than income taxes. Our present tax system exempts those with very low incomes from paying income taxes. The Jewish community is also concerned that this same population receives basic government services from the state that they cannot pay for themselves. The system the state uses to collect revenue to support these services becomes a social justice issue.

The bills seeking to eliminate the state income tax include provisions expanding the state sales tax both in the scope of goods and services taxed and in the taxation rate. Although these bills have been revised over the past month in terms of the specific items to be taxed and the amount or availability of any potential prebate to lower income families, there is no way for Missouri lawmakers to tweak their way out of the problems with these proposals. All proposals would impose sales taxes on many basic goods and services, including food and prescription drugs, nursing home services, rent, auto repairs and mental health and disability services and many other items. Individuals living in poverty, those with disabilities and seniors would suffer most by having to pay taxes on the most basic services. The sales tax rate, even by conservative estimate, would have to rise to at least 8.7 percent in order for the state to recoup lost revenue that would result from eliminating individual and corporate income taxes.

Another feature that marks the effort to eliminate the income tax is that it calls for making these tax changes part of the Missouri Constitution. Changing tax rules by Constitutional amendment makes it extremely difficult to amend later should changes be needed. It can be argued that tax policy should not be enacted in the Constitution as economic situations change, the state’s need for revenue can change and there is a need for flexibility in determining what taxes a state needs at any given time.

The earnings tax proposal being circulated by ballot petition, like the bills to eliminate the income tax, proposes eliminating an important source of government funding for basic services with no plan to replace that lost funding. If successful, the initiative would gut services in the City of St. Louis by eliminating 33 percent of St. Louis’s general fund-$145 million- at a time when the City is already struggling to make up an existing $45 million budget shortfall. This would result in cuts to public safety and other basic services in the City and would likely lead to tax increases for lower and middle income families by forcing them to pay more in property and sales taxes to make up for the lost revenue

The JCRC is grateful to NCJW for bringing the tax resolution to the Council. The JCRC urges everyone to contact their state representatives to ask them to oppose SJR 29 and HJR 56. We also urge you to decline to sign the petition circulating that would put a measure on the Fall 2010 ballot to eliminate the earnings tax in St. Louis and Kansas City.

Gail Wechsler is the Director of Domestic Issues/Social Justice at the Jewish Community Relations Council of St. Louis.