Some days of the year are cherished. These holidays allow us to relax and enjoy ourselves. Then there are days like April 15th: Tax Day. For those of you getting money back, this might be considered among those cherished days. For others it is as bad as it gets.
Being a self-employed realtor by trade, payroll taxes are not taken out of my commission checks. While this might sound great, in practice it’s not. Giving up all this money in one sitting instead of spreading it out across the entire year is a hard pill to swallow. But its the life I chose so I shouldn’t complain.
Filing out my federal return was a pretty simple process. I used H&R’s TaxCut software and had no troubles. Even claiming my business expenses was a breeze. Since the State of Missouri plays by nearly identical rules as the federal government, it was just as easy to put together my state return. I didn’t like the fact that I had to pay, but it was a pretty painless paperwork process.
So where’s the rant and why is this pertinent to investing? I’m getting to that. Even though my federal and state returns were a breeze, my return for the City of St. Louis was another thing. If you didn’t already know, if you live or work in the City of St. Louis you are subject to a 1% tax on your earnings in addition to your other income taxes. I should note that rental income does not qualify unless you own the property through a Partnership or Corporation. Still, this tax has broad implications on our city and region as a whole.
I have my problems with this tax from an ethical and business point of view, but the the most frustrating thing is how it is tabulated. Rather than allow you to use the net and gross incomes claimed in your federal or state returns, St. Louis requires you to start from scratch. Many deductions allowed on other returns are not allow for the City.
For instance, you’d think all federal and state income taxes and the self-employment-tax would be write offs wouldn’t you? But no, hat would make too much sense. Not only does the City take away 1% of my income (Kansas City has the same tax by the way), but they base that 1% off an inflated number. When I get taxed on a tax I can’t help but feel like some great injustice is being done to me. I would rather the tax be raised to 1.25% than casually be screwed over like that.
So all those itemized breakdowns I put together for my federal and state returns had to be remade for City Hall. To me, this just seems like an unnecessary hassle, which turns off citizens, business owners and probably City employees. Though I am a huge advocate of figuring out some way to get rid of this tax, I think its unlikely at the current time. But that doesn’t mean we should keep things as they are. No wonder we keep losing businesses and are having such a hard time attracting new ones. Mayor Slay, simplify these taxes! And then get rid of them.
If you’d like to know more about the earnings tax in the City of St. Louis, check out these links:
- St. Louis Collector of Revenue website (official earnings tax site)
- Show-Me Institutes’ on the earnings tax
- Earnings tax debated in Kansas CIty
Happy Tax Day everyone!