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Legislation #: 100030 Introduction Date: 1/7/2010
Type: Resolution Effective Date: 1/17/2010
Sponsor: COUNCILMEMBERS HERMANN, GOTTSTEIN, CIRCO, CURLS, FORD, MARCASON, RILEY, SANDERS BROOKS, SHARP, SKAGGS AND JOLLY
Title: Expressing the City Council's opposition to current efforts to repeal Kansas City's ability to utilize current revenues raised from its earnings tax to fund city services and expressing its intent to continue levying the current voter approved earnings and profits tax that funds basic and essential public services to people living and working in Kansas City and opposing any legislation, initiative or referendum repealing the earnings and profits tax without the City Council's prior endorsement.

Legislation History
DateMinutesDescription
1/7/2010 Filed by the Clerk's office
1/7/2010 Immediate Adoption
1/7/2010 Adopted

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RESOLUTION NO. 100030

 

Expressing the City Council's opposition to current efforts to repeal Kansas City's ability to utilize current revenues raised from its earnings tax to fund city services and expressing its intent to continue levying the current voter approved earnings and profits tax that funds basic and essential public services to people living and working in Kansas City and opposing any legislation, initiative or referendum repealing the earnings and profits tax without the City Council's prior endorsement.

 

WHEREAS, the citizens of Kansas City have twice supported the levying of the earnings and profits tax; and

 

WHEREAS, the earnings and profits tax is the largest source of revenue funding the annual City Budget – providing 42 percent of General Fund Revenues and 16 percent of all budgeted revenues; and

 

WHEREAS, the earnings and profits tax, in whole or in part, funds numerous basic services including but not limited to police and fire protection, trash collection and disposal, street preservation, animal control, illegal dumping, tree trimming, neighborhood preservation and revitalization, dangerous building demolition, weed abatement, and others; and

 

WHEREAS, the earnings and profits tax provides funding for tax increment financing projects as well as other planning and economic development functions; and

 

WHEREAS, the earnings and profits tax contributes to the diversity of Kansas City’s revenue structure and therefore has the positive effect of moderating revenue declines during economic downturns; and

 

WHEREAS, during the recessionary periods (as declared by the National Bureau of Economic Research) of July 1990 to March 1991, March 2001 to November 2001, and December 2007 to the present, the earnings and profits tax showed cumulative growth of 5.5 percent, 0.4 percent, and 5.0 percent respectively; City sales taxes during those same periods showed respective declines of (3.3) percent, (4.2) percent, and (2.0) percent; and

 

WHEREAS, a diverse revenue structure also collects income from a variety of bases thereby not overburdening any particular category of taxpayer; and

 

WHEREAS, the City would need to more than double its current sales tax rate, to approximately five percent, to compensate for lost earnings and profits tax income; and

 

WHEREAS, an increase of this size in the City sales taxes would push the overall sales tax rate in Kansas City over ten percent, which would be considerably greater than any other community in the metro area; and

 

WHEREAS, statutory authorization would be needed to propose an increase in the local sales tax; and

 

WHEREAS, the City would need to triple its aggregate existing total property tax mill rate (a 300 mill increase) to replace lost earnings and profits tax income; and

 

WHEREAS, the impact of such a tripling in the property tax levy would annually cost the owner of a $100,000.00 home and $15,000.00 automobile an additional $720.00 and the owner of a $200,000.00 home and $35,000.00 automobile an additional $1,490.00; and

 

WHEREAS, the City would need to receive statutory authorization to propose an increase in its general property tax rate beyond the current limit of 100 mills; and

 

WHEREAS, the loss of the earnings and profits tax would require the City to file a “material event notice” regarding its bond portfolio, and this would have substantial repercussions in the bond market unless the City can present an acceptable plan for the replacement of this income; and

 

WHEREAS, the earnings and profits tax is effectively a modestly progressive tax, while the sales tax is effectively regressive, and the property tax is effectively proportional; and

 

WHEREAS, local earnings or income taxes are not uncommon among the nation’s largest cities as one in four large urban cities have an earnings or income tax; and

 

WHEREAS, Kansas City’s earnings tax is among the nation’s lowest at one percent with a national average of two percent and a high of 4.54 percent. Only one U.S. city has a lower earnings/income tax rate, 0.7%, than Kansas City. By comparison, the Missouri state income tax rate is six percent on taxable income exceeding $9,000.00; and

 

WHEREAS, the Kansas City earnings tax is applied only to earned income and does not apply to disability, social security, retirement, pension benefits, workers compensation, unemployment compensation, investment income such as interest and dividends, capital gains, contributions to deferred tax plans, educational grants and fellowships and combat zone military pay; and

 

WHREAS, in calendar year 2008 the average business paid approximately $1,106.00 in City net profits tax; and

 

WHEREAS, in fiscal year 2008-09 the average employee paid $530.00 in earnings taxes; and

 

WHEREAS, the earnings and profits tax receives some of its income from non-residents who earn their income in Kansas City and thereby benefit from public safety, transportation, maintenance, preservation, and other basic services and increase the demand for those services; NOW, THEREFORE,

 

BE IT RESOLVED BY THE COUNCIL OF KANSAS CITY:

 

Section 1. That it is recognized that the provision of basic and essential public services to persons living and working in Kansas City requires a reliable means of annual income and that the earnings and profits tax is the single largest component of a diverse revenue structure that funds those services.

 

Section 2. That, all things considered, the Council believes that the earnings and profits tax is an integral, equitable, and complementary component of its overall revenue structure and should continue to be levied for the foreseeable future to insure the continued and reliable funding and provision of public services.

 

Section 3. That the Council hereby opposes any legislation, initiative or referendum, which would repeal the earnings and profits tax without the City Council’s prior endorsement of such action.

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