Collecting the Earnings Tax on Remote Work is Illegal. ‘Nuff Said

The St. Louis Post-Dispatch has had two recent columns criticizing the Missouri House for passing legislation that would further clarify that the City of St. Louis can't collect the earnings tax from remote workers. I say "further clarify" because it shouldn't be necessary at all. What the city did when it started charging the earnings tax for remote work at the start of the pandemic was contrary to the law. Anyone who can read the basic words of the statute can see that. Here is the statute as it is now and has been written for some time (emphasis added):

Salaries, wages, commissions and other compensation earned by nonresidents of the city for work done or services performed or rendered in the city.

It says, "in the city." Not "near the city." Not "connected to the city by a phone line." Not "in the city unless the city's budget really needs the money in which case outside the city is fine." In the city. For the record, a judge also ruled that what the city is doing violates the law.

Both columns admit to this to various degrees. Tony Messenger describes the city's legal argument in the court case as ". . . probably a specious argument." Members of the editorial board admit in their piece that the city's legal argument "isn't strong."

But both pieces conclude that the state legislature should not be doing what it is now doing-further clarifying the law-because the city needs the money. The city's budget problems, however, do not justify the city breaking the law in its tax collections.

That leads me to another point. The evidence from Kansas City is clear that if you refund earnings taxes for remote work, the sky won't fall. Kansas City officials have stated this in hearings that I have attended. The amount of money refunded was not as large as they had feared it would be. In 2019 (all of these are fiscal years), Kansas City collected $272 million in earnings taxes. That fell to $245 million during the pandemic. It quickly rose to $289 million in 2021. And this happened while Kansas City was still refunding earnings taxes for remote work when requested.

There is no evidence the legislation passed by the House would "have a devastating effect on the city" as Tony Messenger says in his column. Even if the bill did have that effect, that wouldn't justify city government ignoring the law.

We can all agree that getting rid of the earnings tax is harder than ever in St. Louis, with skyscrapers that sold for $200 million just over 20 years ago now selling for $3 million. It's hard to depend on property taxes-like most cities in America do-in this scenario.

Decades and decades of bad policies combined with new, fiscally irresponsible "progressive" changes are making St. Louis look more and more like the new Detroit. It's probably time to revisit the optimistic work from Institute analysts a decade ago.