COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:0639S.01I Bill No.:SB 381 Subject:Taxation and Revenue - Income; Kansas City; Saint Louis City Type:Original Date:April 14, 2025Bill Summary:This proposal modifies provisions relating to earnings tax.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028General Revenue*UnknownUnknownUnknownTotal Estimated Net
Effect on General
RevenueUnknownUnknownUnknown
*A reduction in earnings taxes collected by St. Louis City and Kansas City, would reduce the
amount of deductions used in calculating Missouri’s state income tax, thereby increasing state
income tax collections (or reducing state tax refunds). Oversight assumes the unknown revenue
gain could exceed $250,000.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 0639S.01I
Bill No. SB 381
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April 14, 2025
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on FTE 000
☐ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028
Local Government*
More or Less than
($58,500,000)
More or Less than
($58,500,000)
More or Less than
($58,500,000)
*The fiscal impact depends on the number of taxpayers who live in and/or work in Opportunity
Zones and qualify for the exemption of the earnings tax. L.R. No. 0639S.01I
Bill No. SB 381
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April 14, 2025
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FISCAL ANALYSIS
ASSUMPTION
§92.205 – Earnings Tax Opportunity Zones
Officials from the Office of Administration - Budget and Planning (B&P) assume this
proposal would exempt all individual and business earnings from the earnings and payroll taxes
levied by St. Louis City and Kansas City for certain areas beginning tax year 2025. B&P notes
that this proposal would start tax year 2025 but become effective August 28, 2025 – in the
middle of tax year 2025. B&P further notes that while earnings tax returns are not due until
January of the next year, many city residents have the 1% tax withheld from their paychecks.
B&P assumes that St. Louis City and Kansas City will be required to refund any withheld
earnings collections received from January 2025 through August 2025.
To qualify, an area must be in an opportunity zone, with median income under 70% of the
metropolitan statistical area (MSA) and with a poverty rate of 20% or higher.
B&P is unable to determine how much of either city’s earnings, payroll, and profit taxes are
derived from qualifying areas. For the purpose of this fiscal note, B&P will show the potential
impact as “up to” the total amount of taxes collected. B&P notes that the actual impact may be
significantly less.
Based on data published by St. Louis City
1
, in FY23 the city collected $173,595,000 in
individual earnings tax and $107,431,000 in business earnings/payroll taxes. Based on data
published by Kansas City
2
, in FY24 the city collected $252,728,000 in earnings tax and
$73,766,000 in profits tax.
B&P notes that individuals and businesses can deduct the taxes paid to the city on their Missouri
state income tax. Based on 2022 tax return data, B&P determined that 28.8% of individual
itemize their return. For the purpose of this fiscal note, B&P assumes that 100% of businesses
also deduct these taxes. In addition, B&P apportioned out the taxes paid by businesses between
corporations (49.7%) and pass-through (50.3%) businesses, based on annual payroll data
published by the U.S. Census Bureau, in order to determine the correct state income tax rate.
Therefore, B&P estimates that this proposal could increase GR by up to $13,431,413 to
$13,859,231 (depending on the individual income tax rate applied). This proposal could reduce
revenues to St. Louis City by up to ($281,026,000) and revenues to Kansas City by up to
($326,494,000). Table 1 shows the estimated impact by local tax. Table 2 shows the estimated
impact to GR by tax/fiscal year.
1
https://www.stlouis-mo.gov/government/departments/comptroller/investor-relations/city-information/Current-
CAFR.cfm, FY23 CAFR – Table 9, page 216
2
https://drive.google.com/drive/folders/1AMRH4z6Mbjr6LRmEcOFiYUfkaZ-An4CT, FY24 CAFR – Table 9,
page 422-423 L.R. No. 0639S.01I
Bill No. SB 381
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Table 1: Estimated Impact by Tax GR ImpactSt. Louis CityLowHigh
Local Impact
Individual Earnings TaxUp to$2,249,791 $2,349,782 Up to($173,595,000)Business Earnings Tax Up to$2,500,454 $2,559,612 Up to($58,814,000)Payroll TaxUp to$2,269,681 $2,318,582 Up to($48,617,000)Total St. Louis CityUp to$7,019,926 $7,227,976 Up to($281,026,000) Kansas City Earnings TaxUp to$3,275,355 $3,420,926 Up to($252,728,000)Profits TaxUp to$3,136,132 $3,210,329 Up to($73,766,000)Total Kansas CityUp to$6,411,487 $6,631,255 Up to($326,494,000) Estimated ImpactUp to$13,431,413 $13,859,231 Up to($607,520,000)
Table 2: Estimated GR Impact by YearTax
Rate2025 (FY26)2026 (FY27)2027 (FY28)2028 (FY29)
4.70%$13,859,231 $13,859,231 $13,859,231 $13,859,231 4.60% $13,645,322 $13,645,322 $13,645,322 4.50% $13,431,413 $13,431,413
*Up to the estimates shown.
Officials from the Department of Revenue (DOR) state currently the City of Kansas City and
the City of St. Louis are allowed to assess an “earnings tax” on citizens or businesses working in
their city limits. The tax rate is 1%. Information published by these cities indicates that in FY
2023, the City of St. Louis collected $173,595,000 in individual earnings tax and $107,431,000
in business earnings/payroll taxes. Kansas City collected $252,728,000 in earnings tax and
$73,766,000 in profit tax.
Beginning with tax years starting January 1, 2025, this would allow all individuals and
businesses in a “earnings tax opportunity zone” to be exempt from paying the earning tax to their
city. It should be noted that this proposal would not become effective until August 28, 2025, but
is attempting to make this exemption retroactive to January 1, 2025. It should be noted that
while earnings tax is not due until the following January, many of the required payors ask to
have money withheld monthly to make the payments. This could result in Kansas City and St.
Louis needing to refund earnings tax already collected from January 1, 2025, to August 28, 2025.
DOR is unable to determine which businesses or citizens currently live or work in one of these
“earnings tax opportunity zones”. For fiscal note purposes only, DOR will show the impact up
to the total amount of taxes these cities currently collect. L.R. No. 0639S.01I
Bill No. SB 381
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April 14, 2025
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Taxes paid to state and local government can be itemized on a taxpayer’s individual income tax
return. Using DOR’s internal individual income tax system, DOR was able to determine that
approximately 28.8% of all people itemize. For fiscal note purposes, DOR will be assuming that
100% of the eligible companies would be exempt. Using DOR’s confidential income tax data,
DOR knows that DOR can apportion the business funding to 50.3% to corporations and 49.7% to
pass-through businesses.
DOR notes this proposal could reduce revenues to St. Louis City up to ($281,026,000) and
revenues to Kansas City up to ($326,494,000). When the citizens and businesses no longer owe
this tax to the cities, they will no longer be able to subtract it off their MO individual income tax
return. Therefore, general revenue may see an increase up to $13,431,413 to $13,859,231
(depending on the individual income tax rate applied). SB 3 adopted in 2022 allows the
individual income tax rate to decrease based on certain revenue triggers being met. Currently for
tax year 2025 the rate is 4.7% but can drop to 4.5% over a period of years. DOR will show the
impact over the rate decreases of SB 3.
Table 1 shows the estimated impact by local tax.
Table 1: Estimated Impact by Tax GR Impact St. Louis CityLowHighLocal ImpactIndividual Earnings TaxUp to$2,249,791 $2,349,782 Up to($173,595,000)Business Earnings Tax Up to$2,500,454 $2,559,612 Up to($58,814,000)Payroll TaxUp to$2,269,681 $2,318,582 Up to($48,617,000)Total St. Louis CityUp to$7,019,926 $7,227,976 Up to($281,026,000) Kansas City Earnings TaxUp to$3,275,355 $3,420,926 Up to($252,728,000)Profits TaxUp to$3,136,132 $3,210,329 Up to($73,766,000)Total Kansas CityUp to$6,411,487 $6,631,255 Up to($326,494,000) Estimated ImpactUp to$13,431,413 $13,859,231 Up to($607,520,000)
Table 2 shows the estimated impact to GR by tax/fiscal year.
Table 2: Estimated GR Impact by YearTax
Rate
2025
(FY26)
2026
(FY27)
2027
(FY28)
2028
(FY29)
4.70%$13,859,231 $13,859,231 $13,859,231 $13,859,231 4.60% $13,645,322 $13,645,322 $13,645,322 4.50% $13,431,413 $13,431,413 *Up to the estimates shown. L.R. No. 0639S.01I
Bill No. SB 381
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Officials from the City of St. Louis assume this proposal would eliminate the Earnings Tax on
individuals working and businesses operating within defined Opportunity Zone Clusters and
qualified census tracts as defined under respective U.S. codes. No actual earnings tax data from
these portions of the City are currently available. However, estimates can be made drawing upon
data from the 2018-2022 American Community Survey 5-year estimates published by the U.S.
Census Bureau. Based on this survey data there are 27 census tracts which would fall under the
proposed zones with an estimated annual income total of over $1.4 billion. This does not include
businesses operating in these areas. With the Earnings tax at 1%, the potential loss in revenue
could be expected to be a minimum of $15 million per year.
Adding significantly to this loss however, is the pending relocation of the National Geospatial
Intelligence Agency (NGA) from its current location in the Soulard Neighborhood of the City
into one of these impacted census tracts. The NGA project is a $1.7 billion construction project
serving as a catalytic development to the region, City and the surrounding neighborhoods. This
development was made possible in part by a cooperative funding agreement between the City
and State of Missouri that secured the retention of this key employer with over 3,100 workers
within the City and State. The equivalent of the Earnings taxes generated by the employees of
NGA was utilized as a basis of the financing agreement and the elimination of these revenues
would undermine the spirit of this agreement. In 2021, it was estimated that the Earnings Tax
receipts generated by NGA workers in the City totaled $3.5 million. As the NGA relocation is
anticipated to be completed in 2026, these revenues would also be lost under the legislative
proposal.
Total combined loss would be in the range of $20 million annually. L.R. No. 0639S.01I
Bill No. SB 381
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Oversight notes the following map represents the geographies within St. Louis City that would
be impacted by this proposal.
Officials from the City of St. Louis note the Earnings Tax is the City’s single largest source of
revenue, amounting to over a third of the General Fund budget. Total net receipts in FY24 were
just under $225.7 million. The proposed legislation would eliminate the tax within targeted
census tracts and the potential loss of City revenue would be significant – having a negative
impact on the City’s credit and fiscal condition and impairing the City’s ability to provide basic
City services. L.R. No. 0639S.01I
Bill No. SB 381
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As a way of illustration – a potential loss of $20 million of annual Earnings Tax revenue would
be:
- Over 12% of the total FY24 general fund budget of the Police Department at $164.4
million.
Or:
- Over 25% of the Fire Department budget of $74.1 million
Or about the equivalent of these other City services:
- Forestry Division – Trimming/Weed & Debris - $9.3 million
- Park Maintenance - $10.6 million
Or:
- Street Maintenance & Repair - $9.7 million
- Traffic & Street Lighting - $11.7 million
Officials from Kansas City state this proposal would have an estimated negative fiscal impact of
$38.5 million for the City of Kansas City and an estimated negative fiscal impact of $9.625
million for the Kansas City Police Department.
Oversight assumes that St. Louis City would have a $20 million revenue loss from eliminating
the Earnings Tax on Opportunity Zones in distressed communities for this proposal. Oversight
also assumes KC will have a $38.5 million revenue loss from eliminating the Earnings Tax on
Opportunity Zones in distressed communities from this proposal. Therefore, Oversight will
reflect a $58.5 million total revenue loss to local governments for this proposal starting in FY26.
Oversight will show an unknown revenue gain to general revenue starting in FY 2026 that could
exceed $250,000 if some taxpayers no longer deduct the earnings tax from their state income tax.
Oversight notes that taxpayers who paid earnings taxes from January 2025 to August 2025
would have a potential refund from Kansas City and St. Louis City since the legislation would
not go into effect until August 28, 2025. Oversight has no information on how much that refund
would be from Kansas City and St. Louis City, but will assume the refund from these two cities
would occur in FY26.
Officials from the Department of Economic Development
fiscal impact on their organization. Oversight does not have any information to the contrary.
Therefore, Oversight will reflect a zero impact in the fiscal note. L.R. No. 0639S.01I
Bill No. SB 381
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FISCAL IMPACT – State GovernmentFY 2026
(4 Mo.)
FY 2027FY 2028GENERAL REVENUERevenue Gain – calculation of
deductions relating to earnings tax that
can no longer be itemized on state taxes
§92.205 p. 8UnknownUnknownUnknown
ESTIMATED NET EFFECT ON
GENERAL REVENUE*UnknownUnknownUnknown
*Oversight assumes the unknown revenue gain could exceed $250,000.
FISCAL IMPACT – Local GovernmentFY 2026
(4 Mo.)
FY 2027FY 2028ST. LOUIS CITY & KANSAS CITYRevenue Loss – St. Louis City -
potential loss in revenue from
eliminating the Earnings Tax on
Opportunity Zones in distressed
communities §92.205 p. 8
More or Less
than
($20,000,000)
More or Less
than
($20,000,000)
More or Less
than
($20,000,000)
Revenue Loss – Kansas City - potential
loss in revenue from eliminating the
Earnings Tax on Opportunity Zones in
distressed communities §92.205 p. 8
More or Less
than
($38,5000,000)
More or Less
than
($38,500,000)
More or Less
than
($38,500,000)
ESTIMATED NET EFFECT ON ST.
LOUIS CITY AND KANSAS CITY
FUNDS
More or Less
than
($58,500,000)
More or Less
than
($58,500,000)
More or Less
than
($58,500,000)
FISCAL IMPACT – Small Business
Small businesses who are in an Earnings Tax Opportunity Zone could have an impact as a result
of this proposal. L.R. No. 0639S.01I
Bill No. SB 381
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April 14, 2025
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FISCAL DESCRIPTION
This act provides that earnings tax shall not be imposed upon the salaries of residents of or
persons performing work in an earnings tax opportunity zone, nor on the net profits of businesses
performing work in an earnings tax opportunity zone. An earnings tax opportunity zone is
defined as an opportunity zone cluster of qualified census tracts organized within a distressed
community, as such terms are defined in the act.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration - Budget and Planning
Department of Revenue
St. Louis City
Kansas City
Department of Economic Development
Julie MorffJessica HarrisDirectorAssistant DirectorApril 14, 2025April 14, 2025