Missouri Earnings Tax Initiative, Proposition A (2010)

The Missouri Earnings Tax Initiative, Proposition A, also known as the "Let Voters Decide Initiative", appeared on the November 2, 2010 ballot in the state of Missouri as an initiated state statute where it was approved.

With the approval of the measure, voters in Kansas City and St. Louis were required to hold a referendum on keeping the levy in 2011 and every five years thereafter. If the levy is rejected by voters the tax would be phased out at one-tenth of one percent per year and could not be reinstated. If Proposition A had been defeated by voters the current state laws would have stayed the same, allowing cities to continue generating revenue through earnings tax.

In order to qualify the proposed measure about 95,000 valid signatures were required. The measure was certified by the Missouri Secretary of State after signatures turned in were validated. Supporters submitted more than 200,000 signatures on April 27, 2010.

A total of five different versions of an earnings tax initiative were certified for circulation, however, all versions were submitted by one sponsor - Marc H. Ellinger from Jefferson City, Missouri.

Aftermath

See also: Legislative tampering in Missouri

A month following voters' approval of Proposition A, Kansas City civic leaders announced campaigns to retain the earnings tax. In Kansas City, leaders said they plan to launch a $1 million campaign to preserve the tax. In St. Louis supporters announced a day following the November election that they had $3000,000 in pledged donations and had created a website called Citizens for a Stronger St. Louis. The first earnings tax renewal election, as stipulated by Proposition A, is scheduled for 2011.

However, supporters of the earnings tax in St. Louis and Kansas City aren't stopping at campaigns to save the taxes, they have also initiated efforts to overturn the voter-approved measure. According to reports, they argue that the measure is unconstitutional. The case is pending and a hearing date has not yet been set. Specifically, supporters argue that the measure does not provide funding for the required elections set by Proposition A. The elections, they said, could cost up to $500,000 each.

Additionally, some lawmakers have launched efforts to amend the recently approved measure. Rep. Tishaura Jones filed legislation which would amend the frequency of elections in St. Louis and Kansas City on the earnings tax issue. The elections would be every 20 years instead of every five years.

Local 2011 vote

See also: St. Louis City Earning Tax Measure and Kansas City Earning Tax Measure

City residents in St. Louis and Kansas City voted to keep the 1 percent city earnings taxes on April 5. According to preliminary results, 78 percent voted to keep the earnings tax in Kansas City and 87 percent voted for the tax in St. Louis.

Lawsuit

On July 25, 2011, Kansas City Fire Chief Richard Dyer and civic leader Anita Gorman, who helped lead the effort to establish the earnings tax in 1963, filed a lawsuit Cole County Circuit Court. The lawsuit argues that the "Kansas City charter authorizes the local earning tax and does not require the periodic renewal vote."

A lawsuit was dismissed by Cole County Judge Jon Beetem in mid-August 2011. The lawsuit was filed by the Kansas City attorney’s office on behalf of labor leader Pat Dujakovich and City Manager Troy Schulte. Specifically, the lawsuit notes that the election requirement violates the city charter and state constitution, partially because it requires an election costing about $500,000 every five years. According to Beetem the measure does not violate the state constitution because "the Kansas City Council could on its own abolish the earnings tax and isn’t forced to conduct a costly election."

The dismissal, however, does not affect the lawsuit filed in July 2011.

Election results

See also: 2010 ballot measure election results

Proposition A (Earnings Tax)
Result		Votes	Percentage
a Yes		1,297,197	68.4%
No		599,672	31.6%

Official results via Missouri Secretary of State

Text of measure

Title

According to the Missouri Secretary of State's office, the official ballot title read as follows:

Official Ballot Title:

Shall Missouri law be amended to:

• repeal the authority of certain cities to use earnings taxes to fund their budgets;
• require voters in cities that currently have an earnings tax to approve continuation of such tax at the next general municipal election and at an election held every 5 years thereafter;
• require any current earnings tax that is not approved by the voters to be phased out over a period of 10 years; and
• prohibit any city from adding a new earnings tax to fund their budget?

The proposal could eliminate certain city earnings taxes. For 2010, Kansas City and the City of St. Louis budgeted earnings tax revenue of $199.2 million and $141.2 million, respectively. Reduced earnings tax deductions could increase state revenues by $4.8 million. The total cost or savings to state and local governmental entities is unknown.

Fair Ballot Language:

A “yes” vote will amend Missouri law to repeal the authority of certain cities to use earnings taxes to fund their budgets. The amendment further requires voters in cities that currently have an earnings tax, St. Louis and Kansas City, to approve continuation of such tax at the next general municipal election and at an election held every five years or to phase out the tax over a period of ten years.

A “no” vote will not change the current Missouri law regarding earnings taxes, nor will voters in Kansas City and St. Louis be required to reauthorize their existing earnings taxes.

If passed, this measure will impact taxes by removing the ability of cities to levy earnings taxes. The only exception is that voters in cities that currently have an earnings tax may vote to continue such taxes.

Support

Let Voters Decide was the supporting campaign organization for the earnings tax amendment. Organization spokesperson, Marc Ellinger, said, "The right of voters to have a say on local earnings taxes is what The Let Voters Decide Initiative is about. It does not repeal the existing earnings taxes in Kansas City or St. Louis. It will simply allow local sunset votes on the earnings tax in Kansas City and St. Louis every five years starting in 2011, so voters there can decide for themselves if they want to continue the earnings tax or phase it out gradually over a period of ten years. It also lets voters in other Missouri cities and towns decide if they want to prohibit any new local earnings taxes in their own communities."

• The Show-Me Institute, a Missouri think thank, said in a 2008 study that eliminating the tax would create about 4,700 jobs in the Kansas City area alone. Supporters of the repeal argued that the earnings tax keeps businesses from moving into the area and thus prevents job growth.
• Kansas City Mayor Mark Funkhouser said the earnings tax put the city at a competitive disadvantage. Funkhouser said, in April 2010, if the measure was approved by voters he would consider proposing a land tax to replace the lost revenue.
• The Missouri Libertarian Party supported Proposition A.
• National Taxpayers Union, a taxpayer advocacy organization, supported a "Yes" vote on Proposition A in their 2010 Ballot Guide.

Donors

According to October 15, 2010 quarterly reports, Let Voters Decide collected $10,807,693.73 in contributions in 2010. The committee also reportedly spent $6,352,764.20.

Rex Sinquefield was not only the initiative sponsor but also the main contributor to the campaign. According to 2010 campaign finance reports, he donated an estimated total of $7.32 million to the campaign. In June 2010, Sinquefield made two donations of $2.5 million. And one donation of $3.9 million in late September 2010.

Below is a chart that outlines the major cash contributions to Let Voters Decide:

Contributor	Amount
Rex Sinquefield, retired Missouri philanthropist	$7.32 million
Robert F. Poli (Washington University Education)	$200
Travis Brown, Missouri Lobbyist	$5001.00
Lukasz Tomicki	$150.00
United for Missouri's Future	$258.04

Opposition

• Kansas City and St. Louis city leaders lobbied in support of keeping earnings taxes in March 2010. "We are the economic engines of Missouri," said St. Louis Alderman Stephen Conway. Both cities said they agree that the earning tax is essential to providing the cities the basic services they require.

• A Springfield Firefighters Association argued that the approval of the earnings tax initiative, although Springfield does not have one, would bar the implementation of the tax anywhere in Missouri and added that they were concerned about the possible ripple effects.

• The Missouri Rural Crisis Center was opposed to the proposed initiative. Rhonda Perry, the organization's director, said, "We think it is very important for people to just know and understand that the petitions that they read are really important and can have lasting impact. This particular ballot initiative would actually take away the tool that cities may want to use in the future in Missouri to increase their income to fund basic services."

• On April 28, following the submission of more than 200,000 petition signatures by supporters, the St. Louis Association of Elected Officials released a statement arguing that ending the earnings tax would mean the end of 39.2% of the city's revenues and begin a large increase in taxes. According to reports the association included: St. Louis Recorder of Deeds Sharon Carpenter, Collector of Revenue Gregory F.X. Daly, Circuit Clerk Mariano Favazza, Circuit Attorney Jennifer Joyce, License Collector Michael McMillan, Sheriff James Murphy, Public Administrator Gerard Nester and Treasurer Larry Williams.

• Gov. Jay Nixon announced his opposition to Proposition A on September 23, 2010. "I think we should provide a broad arsenal of options for local governments to fund their services. I just don’t think the state should be in the position of limiting those options," said Nixon of the measure.

Donors

According to July 7, 2010 quarterly reports, United for Missouri's Priorities collected $375,050 in 2010. The committee also reported $340,213.01 in expenditures. Washington University in St. Louis donated $5,000 in mid-August.

Below is a chart that outlines the top 5 major cash contributions to "United for Missouri's Priorities":

Contributor	Amount
National Education Association - DC	$450,000.00
Missouri Jobs with Justice	$100,000
Missouri Federation of Teachers	$55,000
Missouri NEA	$40,000
AFSCME International	$65,000
Greater KC AFL-CIO	$76,000
The Civic Council of Greater Kansas City	$75,000
SEIU	$50,000
Missouri State Council of Fire Fighters	$20,000
Int. Assoc. of FF Local 3808 KC Chiefs	$15,000
BJC Health Systems	$25,000

Tactics and strategies

Opponents submitted a joint letter to Gov. Jay Nixon speaking out against the proposed Proposition A. The letter was signed by several organizations, including: American Federal of State, County and Municipal Employees Council 72; the Civic Council of Greater Kansas City; Greater Kansas City ALF-CIO; and others. According to reports, the letter outlined the possible impacts of Proposition A. In closing, the letter said, "On behalf of our respective organizations, we strongly encourage you to publicly and vigorously oppose Proposition A in November. We would appreciate the opportunity to have a meaningful conversation with you about Proposition A and your position."

Policy analysis

Show-Me Institute Reports

Throughout the years the Show-Me Institute released numerous reports arguing that the earnings tax should be replaced and the impacts of the earnings tax on Saint Louis and Kansas City.

In July 2009 article, the institute acknowledged that although neither Saint Louis or Kansas City could attribute their declining revenues to their 1-percent earnings tax, it was a common element in both cities. However, the article argued that as technology and transit became cheaper the earnings tax may be shifting residents towards the suburbs or out-of-state. Compared to Springfield, which did not have an earnings tax, had seen lower rates of suburban migration and higher rates of personal income growth than Kansas City or St. Louis. Should St. Louis end the tax the Show-Me Institute said the negative growth rate would reverse. The same went for Kansas City. The estimated income gains for St. Louis were $1.5 billion and $3.2 billion for Kansas City.

In 2007 Show-Me Institute released reports analyzing how Kansas City and St. Louis could go about replacing the earnings tax. Reports can be viewed here: St. Louis and Kansas City.

Response to reports

In May 2010 Lisa Gladson, an economic professor at St. Louis University, and Jack Strauss, director of the Simon Center for Regional Forecasting at St. Louis University, argued that there was "NO relationship between earnings taxes and a city's income growth as the earnings tax coefficient falls to zero" in a St. Louis Post-Dispatch article. Contrary to a report released by Show-Me Institute both Gladson and Strauss argued that the earnings tax in Kansas City and St. Louis were not to blame for the cities' income growth. The analysis, according to the article, reviewed more than 100 cities and 30 years of data. Gladson and Strauss instead argued that "an overwhelming reason why cities like St. Louis City tend to grow more slowly than their younger counterparts is just that: they are older, richer and more unionized cities. This is due to an economic property known as convergence." Additionally, the analysis argued that there was no evidence that an earnings tax discouraged businesses from locating there. Gladson and Strauss said other factors impacted the location of businesses: skilled workforce, limited bureaucracy, infrastructure, qualify of life and cost of doing business.

Supporters respond to criticism

Following the editorial by Gladson and Strauss, Marc Ellinger - a Jefferson City lawyer and spokesman for Let Voters Decide - wrote, "A yes vote on the Let Voters Decide initiative in November merely gives voters in Kansas City and St. Louis the right to decide whether they want to keep their earnings taxes. Specifically, it requires local sunset votes on the existing earnings taxes in St. Louis and Kansas City every five years, starting in 2011. These votes will let St. Louis and Kansas City voters decide for themselves if they want to continue the earnings tax in their city or phase it out gradually over a period of 10 years — at the rate of one-tenth of 1 percent per year."

Media editorial positions

See also: Endorsements of Missouri ballot measures, 2010

Opposition

• The St. Louis Post-Dispatch was opposed to the proposed earning tax initiative. The initiative has not been certified for the ballot but in a May 2010 editorial the board said, "St. Louis and Kansas City long have depended on earnings taxes to pay for basic municipal services — the kind that are essential to keeping commercial districts and neighborhoods safe and attractive. If their earnings taxes are lost, and replacement taxes are not found, both cities would descend into financial chaos...It would give voters in places like Peculiar and Chillicothe the right to impose mandates on St. Louis and Kansas City. It would prevent all Missouri communities from enacting the local tax policies they deem best."

• The Kansas City Star said, "What’s not to like? Plenty. To start with, Proposition A is a draconian measure that’s aimed at killing the earnings tax in elections next year in Kansas City and St. Louis. If that happens, Kansas City’s revenues for basic city services — mostly for public safety — could be slashed $200 million a year. Plus Sinquefield and his anti-tax brethren have offered no alternatives on how to cut the city budget or bring in other funds to keep the city operating without the E-tax."

• The Southeast Missourian said, "Recommendation: Oppose. This proposition is basically aimed at St. Louis and Kansas City. Better for voters there to make the decision for themselves through normal processes rather than to do an end-run."

• The Hannibal Courier-Post said, "St. Louis and Kansas City officials are right when they say elimination of the earnings tax would cause irreparable harm. Not only would basic services be affected, but long-term efforts might be abandoned because there was not a reliable source of revenue. If voters decide to say no in the future to such taxes, they can do so. But democracy demands that it not be against the law for them to make the choice. Voters should reject Proposition A."

• The Joplin Globe said, "Proposition A isn’t about only St. Louis or Kansas City, it’s about every city in Missouri. It’s about us. The only way to “let voters decide” is to vote no on Proposition A. It’s hard to find a major daily newspaper in Missouri that has endorsed this bad ballot question. We’re joining that skeptical crowd."

Polls

See also: Polls, 2010 ballot measures

• A October 18-20, 2010poll for the Post-Dispatch and KMOV-TV (Channel 4) by Mason-Dixon Polling & Research Inc. revealed that 59% of polled voters supported Proposition A, while 25% were opposed and 16% were undecided.The poll, of 625 registered Missouri voters, had a margin of error of 4 percentage points.

Legend      Position is ahead and at or over 50%     Position is ahead or tied, but under 50%

Date of Poll	Pollster	In favor	Opposed	Undecided	Number polled
Oct. 18-20, 2010	Mason-Dixon Polling & Research Inc.	59%	25%	16%	625

Lawsuits

See also: 2010 ballot measure litigation

Kansas City challenges measure

On August 13, 2010 Galen Beaufort, the Kansas City attorney, filed a lawsuit in Cole County Circuit Court against Proposition A. Challengers argued that the proposed measure was unconstitutional and asked the court to remove the measure from the November 2010 ballot. Specifically the lawsuit said the measure violated the state's single-subject rule, failed to make necessary distinctions between personal and business versions of the tax and mandates elections without funding them.

The lawsuit was filed 10 days following the certification of the measure by the Missouri Secretary of State. In response to the filed challenge, Let Voters Decide spokesperson Scott Charton called the lawsuit "an absurd act of desperation by special interests that don’t want voters to have a say on local earnings taxes." Prior to the certification of the measure, according to reports, the Kansas City Council unanimously voted to authorize the city attorney to take any legal actions deemed appropriate to challenge the initiative.

Let Voters Decide filed a motion in mid-August requesting a Cole County judge permission to take care part in the lawsuit case.

Cole County Circuit Judge Jon Beetem heard arguments on September 17.

Challenge rejected

Three days following the court hearing on September 20 Cole County Circuit Judge Jon Beetem ruled that Proposition A would remain on the 2010 ballot. In a two-page ruling Judge Beetem ruled that the allegations should be raised in a lawsuit following the November elections and rejected the challenges raised by Kansas City officials. The lawsuit alleged that the measure included too many topics and challenged the costs to municipalities for the required elections should the measure be approved by voters.

Path to the ballot

See also: Missouri signature requirements and 2010 ballot measure petition signature costs

To qualify for the ballot, initiatives required signatures from registered voters equal to 5% of the total votes cast in the 2008 governor's election from six of the state's nine congressional districts. Petition signatures were due by May 2, 2010. All five proposed initiatives were cleared for circulation in January 2010. According to reports, supporters filed more than 200,000 signatures on April 27, 2010. The measure was approved for the November 2010 ballot in early August 2010.

According to reports, a spending disclosure for the first three months of 2010 revealed that the supporting campaign paid National Petition Management, a signature-gathering firm, a total of $575,757.

See also

Suggest a link

• 2010 ballot measures
• Missouri 2010 ballot measures

Articles

• Missouri city officials prepare for earnings tax vote, while challenges to Proposition A continue
• Missouri measures successfully approved, one remains pending
• Missouri earnings tax measure remains on the ballot; challenge rejected
• Missouri city officials file lawsuit to block earnings tax measure
• Missouri election officials certify 2 of 4 initiative petitions for November ballot
• Missouri earnings tax initiative remains pending; receives funding boost
• Four initiatives aim for the Missouri ballot

External links

• Let Voters Decide, campaign finance information (support)
• United for Missouri's Priorities, campaign finance information (opposition)
• Missouri 2010 ballot issues

Measure details

• Full text of Version 1
• Full text of Version 3
• Full text of Version 5
• Full text of Version 7
• Full text of Version 9

Additional reading

• The Kansas City Star,"Earnings tax vote worries KC leaders," November 4, 2010
• Kansas City News,"Proposition A Missouri 2010" November 2, 2010
• KMBC,"Prop A One Of November Ballot's Top Questions," October 26, 2010
• The Kansas City Star,"Survey finds uncertainty about earnings tax measure on November ballot," October 15, 2010
• St. Louis Post-Dispatch,"Battle over Proposition A pits cities against Sinquefield," October 10, 2010
• The St. Louis American,"Prop A and the poor: Sinquefield’s tax policies would shift burden to sales tax and low-income," October 1, 2010
• The Kansas City Star,"E-tax referendum on ballot; campaign push on both sides abruptly begins," September 20, 2010
• Missourinet,"From 100 to 23 to 4; initiative petitions are one step from Nov. ballot," May 18, 2010
• Examiner,"Petitions to be reviewed by Missouri Secretary of State's office," May 3, 2010

Editorials

• News-Leader,"Prop A good for keeping costs at bay," October 2, 2010
• St. Louis Post-Dispatch,"Show-me: Rex Sinquefield owes voters explanation on earnings tax initiative," September 7, 2010
• Kansas City Star,"This earnings tax fight faces odd twists," August 5, 2010
• Kansas City Star,"Rex Sinquefield sinks another $2.5 million into E-tax repeal effort," June 4, 2010