No doubt, one of Kansas City's most vexing growth issues is its 1 percent earnings tax on individuals working in the city and businesses in the city. Economic development types believe it stunts corporate relocations to KC, and Kansans sometimes quip it's the single reason why they wouldn't work in Missouri.
Mayoral hopeful Henry Klein wants to do something about it. He proposes trying to gradually reduce part of the tax.
"Ultimately, my goal is to eliminate the earnings tax altogether," Klein said in a statement.
This marks a different stance for a KC mayoral candidate. In the race so far, candidates have steered clear of the issue, even though a Missouri think tank recently advocated eliminating the tax. This was brought up at one mayoral forum, but several candidates noted the earnings tax is the city government's largest source of revenue. Becky Nace has pushed for eliminating the tax for members of the military. But Albert Riederer summed up the stance of most candidates: "The e-tax is here, and it does work," he said.
Klein wants to take the first step toward getting rid of the earnings tax by giving small businesses a break. He has studied the issue enough to know that both individuals and businesses pay the tax, with businesses generating a sliver of the total revenue. Klein wants to cut off the bottom 10 percent of that business tax revenue, amounting to an estimated $3 million.
He believes that tax break will end up resulting in more job creation and business growth, which he maintains would generate more revenue for the city in other ways (a little supply-side economics), while also giving those businesses a little boost to stay afloat and contribute more earnings tax down the road.
Klein says if he's elected, he will create a task force to further study the earnings tax.
Posted by Jeffrey Spivak