Friday, January 16, 2009

Examining the Earnings Tax

David Nicklaus made mention of the earnings tax in his blog recently:

Some winners of the RCGA’s Right Arm of St. Louis award use their acceptance speeches to propose bold new initiatives. John Bachmann, who accepted the award Thursday night, presented a wish list of ongoing projects that he wants to see succeed — the BioBelt effort to support the life sciences, the attempt to get Ballpark Village built, and so on. He did strike one bold note at the end of his list, though: Bachmann said he’d like to get rid of St. Louis’ city earnings tax. He called it “one of the region’s great speed bumps.” Bachmann, a senior partner at Edward Jones, is also a former chairman of the Regional Chamber and Growth Association.

I agree.

In the past, I've made the argument that most other major cities also have earnings taxes that don't seem to be hindering the growth of their CBDs any. However, I now think that this is a bit of an apples-to-oranges comparison that ignores just how unique St. Louis is.

And the reason why it's difficult to compare St. Louis to other cities stems from the "Great Divorce" between St. Louis City and County.

If our city fathers actually had the foresight to expand the city's boundaries beyond Skinker Blvd. to, say Lindbergh or 270, the earnings tax would be much less of a deterrent as there's a good chance that the CBD's biggest competitor for office tenants - downtown Clayton (at least as we know it today) - would not be a factor.

If the city of St. Louis was part of St. Louis County - and the county seat of St. Louis County - the problem would not be as bad. Instead, as an entity independent of the city of St. Louis, St. Louis County chose Clayton as its county seat. And of course, as county seat, Clayton became home to the county courthouse and a business district sprang up around it. Would downtown Clayton as we know it today even exist if the city of St. Louis was the county seat of St. Louis County? I'm not so sure.

Instead, the CBD is in competition with a secondary business district that is in very close proximity and is not hampered by the earnings tax. The playing field needs to be leveled before the next Ernst & Young, Armstrong Teasdale or Husch & Eppenberger decides to jump ship.

1 comment:

Adam Flath said...

I agree completely.
The city is going to reply: “There goes half our budget”
Well maybe it is time for some spring cleaning at city hall, and this might be the best way to accomplish it.