St. Louisans are being asked to reauthorize the earnings tax, Proposition E (Prop E), on the April 5 ballot. A “yes” vote will ensure the continuation of critical city services.
What is the earnings tax? The earnings tax is an assessment, or tax, levied on everyone who lives and/or works in the city of St. Louis. The 1 percent tax is imposed on salaries, wages, certain commissions and other compensations. It provides one-third of the city’s general operating budget.
St. Louis first enacted the earnings tax at the 1 percent rate in 1959, but finds its origins in 1939, when Philadelphia became the first city in the nation to impose a local wage tax. Compare St. Louis’ low 1 percent rate to other major cities that impose an earnings tax: Philadelphia, 3.98 percent; New York, 2.9-3.65 percent; Baltimore, 3.2 percent; Pittsburgh, 3 percent; Cincinnati, 2.1 percent; and Cleveland, 2 percent.
The earnings tax is the largest source of general revenue, estimated at over $164 million, or about 33 percent of the city’s $492.6 million general revenue budget. As a perspective, the budget for the police department alone is $156.2 million. The budget pays for public safety (fire and police), streets maintenance, lighting, corrections and other city services.
Who pays this tax? Interestingly, it is not only St. Louis city residents who pay the assessment. City residents pay 40 percent of the revenue collected; St. Louis County and Illinois wage earners together pay 60 percent. Everyone who earns wages (and other compensations) within the city limits is assessed and is a beneficiary of vital city services, such as public safety, maintained roads, bridges and other amenities.
Who approves the tax? The earnings tax must be voted on and approved by ballot every five years by St. Louis citizens. City residents know that a “yes” vote is by far the most equitable way of funding and maintaining critical city services and is paramount to the city’s growth and vitality. Voters last approved the earnings tax in April 2011, with an 88 percent approval rate.
What would happen if Prop E fails?
Failure to approve Prop E on April 5 would be devastating. Without one-third of the general operating budget, services will be cut, meaning fewer police and firefighters to fight crime and protect our resources; and roads and bridges will be severely impacted. A new revenue source will need to be found.
Other tax options would be less equitable, and in some cases double tax burdens, such as higher sales, property and corporate taxes. St. Louis could become a less attractive community in which to live and to do business. St. Louis residents should vote “yes” on Prop E to ensure St. Louis has a bright future.
Darlene Green, comptroller of the City of St. Louis, is charged with protecting the credit of the city and with being a watchdog over taxpayer dollars.
