Kansas City, Missouri voters will decide April 7 whether to continue one of the city’s largest sources of revenue — a tax that funds nearly half of the city’s general operations.
At issue is Kansas City’s 1% earnings tax, a levy on wages and business profits that has helped pay for city services for more than 60 years. The tax must be renewed by voters every five years under Missouri law.
The question itself is simple. The official ballot language reads:
“Shall the earnings tax of 1%, imposed by the City of Kansas City, be continued for a period of five (5) years commencing January 1 immediately following the date of this election?”
A “yes” vote would keep the tax in place for another five years, returning it to the ballot in 2031. A “no” vote would trigger a gradual phase-out, reducing the tax by one-tenth of a percent each year beginning in 2027 until it disappears entirely in 2036.
What the earnings tax is
Kansas City’s earnings tax is collected from workers and businesses.
The tax applies to 1% of wages and salaries earned by people who live in Kansas City as well as people who work in the city, regardless of where they live.
For example, a resident of Overland Park who works at Crown Center pays the earnings tax to Kansas City. Likewise, a Kansas City resident who commutes to Lenexa also pays the tax because they live in the city.
The tax also applies to net profits from businesses located in Kansas City, from large corporations to self-employed workers.
The tax does not apply to Social Security, retirement benefits or unemployment payments.
A major piece of the city budget
The earnings tax is one of the most important revenue streams for Kansas City government.
In the most recent fiscal year, the city collected about $351 million through the tax — roughly 44% of Kansas City’s general fund revenue.
By comparison, Kansas City collected about $81.6 million in property taxes, or about 10% of the general fund.
The general fund pays for a wide range of city services, including police and fire operations, road maintenance, trash collection and other programs. Under Missouri law, Kansas City must also spend 25% of its general fund on its state-controlled police department.
Because earnings tax revenue flows into the general fund, the City Council has broad authority to decide how to spend it. That flexibility makes it different from many other revenue sources, such as federal grants or certain sales taxes, which can only be used for specific purposes.
Why the vote happens every five years
Kansas City first adopted the earnings tax in 1963, when voters approved a change to the city charter. Then-Mayor Ilus Davis championed the measure, and it passed with about 63% of the vote.
For decades, the tax remained in place without requiring voter renewal.
That changed in 2010, when Missouri voters approved a statewide ballot measure known as Proposition A. The measure requires Kansas City and St. Louis — the only Missouri cities with earnings taxes — to seek voter approval every five years to continue collecting the tax.
If Kansas City voters reject the tax in April, it would be phased out gradually over 10 years, with the rate declining each year until it reaches zero in 2036.
The 2010 ballot campaign was heavily funded by St. Louis businessman Rex Sinquefield, who donated about $1.3 million to support the proposal.
Statewide voters ultimately approved Proposition A with about 68% support, though voters in both Kansas City and St. Louis largely opposed it.
Support for renewing the tax
Despite the political debate that led to the five-year renewal requirement, Kansas City voters have consistently supported the tax in past elections.
Each time the measure has appeared on the ballot since 2011, it has passed by large margins.
A broad coalition of business and civic organizations has backed the tax’s renewal again this year, including the Greater Kansas City Chamber of Commerce, the Urban League of Greater Kansas City and Freedom Inc.
Supporters argue the tax is essential to maintaining city services and helps ensure that people who work in Kansas City — even if they live elsewhere — contribute to the cost of operating the city.
There is not a formal organized campaign opposing the tax in this year’s election. However, the earnings tax has long drawn criticism from some tax-reform and conservative policy groups in Missouri that argue the tax discourages economic growth and job creation.
Those arguments helped fuel the 2010 statewide ballot initiative requiring Kansas City and St. Louis voters to renew their earnings taxes every five years.