Center for Economics and the Environment: Policy Series
This study provides estimates of the effect of earnings taxes in Saint Louis and Kansas City on population growth in the two cities and their surrounding metro areas. The results of this analysis are consistent with the proposition that the earnings taxes had negative effects on population growth in the City of Saint Louis and Kansas City, and positive effects on the rest of their metro areas. In net, the estimates indicate that the metro areas lost population because of their central cities’ earnings taxes. To summarize:
- About one-half (14,700) of the population decline in the City of Saint Louis between 2000 and 2010 is attributed to the city’s earnings tax.
- The rest of the Saint Louis metro area is estimated to have had an increase of about 3,500 people because of the City’s earnings tax, resulting in a net loss of about 11,200 people in the Saint Louis metro area as a whole.
- Kansas City’s earnings tax is attributed with cutting the city’s population growth in half. Specifically, the city’s population in 2010 was about 18,700 lower than it would have been in the absence of the tax.
- While the rest of the Kansas City metro area is estimated to have experienced a small increase in population because of the earnings tax (about 2,100 people), the net effect is that there were about 16,600 fewer people in the metro area.
Given the significant negative relationship between earnings taxes and population growth in Saint Louis City and Kansas City, and the need to raise revenue to finance essential services, it is natural to ask what the cities should do instead. The answer to this question may lie in looking to the policies of other cities who have successfully raised raised revenue in less deleterious ways than the earnings tax employed by Saint Louis City and Kansas City.
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Wall, Howard J., "Updated Estimates Of The Effects Of Earnings Taxes On City Growth" (2017). Center for Economics and the Environment. 10.