On Aug. 7, Kansas City voters will consider a proposed sales tax increase. Is this a good move for Kansas City? Or is it just more of the same desperate cycle? City taxes and regulations hurt the business environment. Businesses and jobs leave. City funds and services suffer. Taxes are increased to replace funds and maintain services. More businesses and jobs leave. Repeat. While this is being sold as a tax switch, the new revenue from sales taxes will be much higher than the offsetting cuts from the elimination of land taxes and car registration fees.
Also, is raising the sales tax the most efficient way to gain revenue for the city? Why would the city want to eliminate its land tax in the first place? My colleagues, Professor Joe Haslag and Policy Analyst David Stokes, have written about the benefits of land taxation for local governments. Kansas City is unique among local governments in Missouri because it is able to collect land taxes. There is widespread agreement among economists that land taxation causes a minimal amount of economic distortion, yet in its search for extra revenue, Kansas City looks to raise sales taxes.
When people vote on an issue, they should be equipped with as much information as possible. The situation in Kansas City is no different. Even though half a cent sales tax increase does not seem like a large amount, people should be aware that even innocuous decisions can carry with it unforeseen consequences.
