‘Saint Louis Has High Taxes!’ Say International Accountants
KPMG, one of the world’s Big Eight, Six, Five, Four accounting firms, released a study last week that ranked Saint Louis as having the second highest tax burden of major American cities. I admit that I was surprised Saint Louis ranked that poorly. (Perhaps our “progressive” citizens are proud of this, and now have a goal to shoot for being No. 1.)
There are two frustrating things about the study. First, as the St. Louis Post-Dispatch’s David Nicklaus noted, it does not make clear whether it is referring to just the city or to the entire region. Obviously, that has repercussions. If they applied the city’s 1.5 percent earnings and payroll tax to the entire region (as I think they did), that would be an error. Second, it is frustrating that Kansas City was not included in the study.
According to Nicklaus’ write-up, the main reason we ranked so poorly was our “relatively high property tax costs.” Some people might question that, as Missouri is not really known for high property taxes, even for businesses. In fact, this study by the Tax Foundation ranked Missouri as seventh best from the business property tax perspective.
How do these discrepancies come about?
First, it appears they are compiling their rankings with different methodologies. The Tax Foundation (which gives a better explanation of its methods) gives a lot of weight to certain property taxes (intangibles, inventory, franchise) that Missouri no longer has. So we rank very highly because we do not have those. KPMG appears to be going simply on total property tax bills and rates.
But I think the main reason Saint Louis ranks poorly while Missouri is ranked highly is that the main corporate property tax is the commercial surcharge, and that tax varies wildly by county within Missouri.
The commercial surcharge is a property tax rate applied on top of general charges for just commercial property, as its name implies. It ranges from 1 cent per $100 of assessed valuation in Reynolds County to $1.70 per $100 in Saint Louis County (followed right behind by $1.64 in Saint Louis City). That is a difference of $5,408 on a $1 million commercial property (not a high valuation for a commercial property). For comparison, 16 of Missouri’s 115 counties have a rate of more than $1, and 68 have a rate below 50 cents per $100 of assessed valuation. That is how Missouri can rank well, but Saint Louis poorly, on business property taxes.
Missouri needs to change our commercial surcharge system to allow the rates to decline as assessments increase, like all other property taxes. For that and other needed changes to the system, please check out this testimony.