Missouri Sen. Kurt Schaefer files bill to repeal earnings tax in Kansas City and St. Louis [updated]

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If Kansas City leaders are worried enough about the April election for renewing the earnings tax — and they are — they have a new, possibly bigger headache to deal with.

Missouri Sen. Kurt Schaefer on Tuesday made good on a threat he made earlier this year when he filed a bill that would repeal the earnings tax in Kansas City and St. Louis. The earnings tax in Kansas City is a 1 percent tax on the income of people who either work or live in Kansas City, as well as on profits of companies within city limits.

The Columbia Republican said this summer that he would file such a bill if both cities entertained ordinances that would raise the minimum wage in each respective city. Missouri law prohibits cities from passing measures that increase the minimum wage beyond the state’s $7.65 an hour rate. Kansas City went ahead and did it anyway with an ordinance that would gradually increase the city’s minimum wage to $13 an hour. The city later repealed the ordinance after determining that it treaded on dubious legal grounds.

“If the goal of the proposed minimum-wage hike is to put more money in people’s pockets to later spend in the local economy as stated by [St. Louis] Mayor [Francis] Slay, the best way to accomplish this is to allow the more than 12,000 businesses and all of their employees to keep an extra one percent of their paychecks,” Schaefer wrote in a letter to other Missouri senators.

Schaefer’s bill may be more worrisome to City Hall than the April election. The Missouri General Assembly is dominated by Republicans, many who answer to St. Louis billionaire Rex Sinquefield. Sinquefield is a leading opponent of the earnings tax — he is the reason that Kansas City votes to renew it every five years.

And if there’s any doubt about Schaefer’s allegiances, don’t look past Sinquefield’s October 9 check to the Columbia senator for $500,000.

While Kansas Citians overwhelmingly approved the renewal of the earnings tax five years ago, statewide legislation takes the matter out of the hands of local voters.

The earnings tax drums up more than $200 million for Kansas City’s general fund and is a major source of cash for public safety and infrastructure.

Schaefer thinks that money should go back to residents.

“The earnings tax is outdated, dysfunctional, and certain provisions are clearly unconstitutional,” Schaefer said in a written statement. “These cities are in direct violation of the Commerce Clause of the United States Constitution, and repealing this tax will increase wages for more than a million hardworking taxpayers in Missouri. This is a harsh double-tax on productivity that is severely restricting employment, investment and growth in our state’s two largest cities.”

Update, 6:01 p.m. 
Kansas City Mayor Sly James was not pleased with Schaefer’s bill. Here’s his statement in its entirety.

“This proposed legislation is faulty in so many respects that it’s hard to know where to start.

“The suggestion that the current Missouri law is unconstitutional ignores the clear legal distinctions between the Kansas City earnings tax and a similar tax in another state on which courts ruled.

“The suggestion that the earnings tax is dysfunctional ignores the fact that the earnings tax is the single major source of the Kansas City general fund. Three-fourths of the fund supports police and fire services, and those services available to the entire metro area through mutual aid agreements.

“The earnings tax functions well, as it has for 50 years, and we will be vigorously fighting this wrong-minded legislation in January.”