A local income tax places a burden on workers in addition to the state and federal income tax they already pay. But to policymakers who want to raise revenue for their municipalities, local income taxes can seem like a good option. Two cases in point are Kansas City and St. Louis, each of which has an earnings tax of one percent on residents and workers. Local income taxes are implemented in 17 states, though most counties, cities, and school districts in the country do not use this form of taxation. There is evidence that local income taxes have negative effects on economic and population growth, and that’s not ideal for our state’s two largest cities.
This report explores local income taxes across the country, dives into the Kansas City and city of St. Louis earnings taxes, and summarizes previous research on the effects of this type of tax on economic growth. It may be time for cities to reconsider whether their local income taxes are sensible.
Click here to read the report online, or click the link below to download the report as a .pdf.