ST. LOUIS — People who live in the city of St. Louis pay a 1% earnings tax. People who live outside of the city, but whose employer is based in St. Louis, also pay the tax. Tuesday, a Missouri appeals court ruled in favor of remote workers who live outside of St. Louis in a decision that would axe a large portion of the city's biggest revenue stream.
In early 2023, a circuit court judge ruled the city would have to refund remote workers who don't live in the city. On Tuesday, Judge Michael Wright upheld that ruling, putting City of St. Louis on the hood to repay millions of dollars in earnings taxes collected from people who worked remotely for for St. Louis based companies.
In his ruling, Wright said the earnings tax law has not been updated since it was written in 1959, and wording in the law did not account for the explosion of remote work as a result of the COVID-19 pandemic.
"Collectors correctly noted in oral argument the world changed as a result of the pandemic. We note the Ordinance’s language has not," the ruling says.
Last month, city officials estimated the impact of losing the earnings tax on remote work at $25.9 million in the upcoming fiscal year.
Alderwoman Cara Spencer heads the budget committee for the St. Louis Board of Aldermen. Right now the board is working to approve next year's budget, which kicks in July 1.
"We are going department by department to hear what departments need, what's in their proposed budgets and what's not," she said.
Her concern is that there are already proposed reductions.
"It cuts out some positions in our refuse department... The budget that's proposed includes staffing 56 refuse drivers, which leaves no wiggle room for days off, for sick days, etc.," she said.
On top of that, the budget reduces the amount of projected revenue by $26 million as part of the contingency plan in the event Tuesday's decision became reality. It did.
Now Spencer is calling on you to tell city leaders what you want.
"If you're concerned and you have thoughts, we want to hear from you. It's incredibly important that our budget (officials) hear from the general public," Spencer said.
The St. Louis Collector of Revenue Gregory F.X. Daly provided the following statement:
"The City of St. Louis is reviewing the Missouri Court of Appeals’ decision that was handed down today.
"In creating the 2025 budget proposal, the mayor took a financially prudent approach to take into account the potential impact of today’s decision. We do not believe this decision will require changes to the budget or will impact the current level of City services."
5 On Your Side is working to determine who would be eligible for a refund and how that process would work.
The city's earnings tax on non-residents was also under scrutiny from another source: state lawmakers. During the 2024 session, Missouri Republicans filed bills at the statehouse to permanently end it for workers who live outside city limits and commute to the city or work remotely.
Mayor Tishaura Jones enacted a hiring freeze on non-essential workers while that bill was being considered, but the session ended without a bill being passed. Jones lifted that hiring freeze earlier this month.
The city's budget committee will hold a public hearing Wednesday, May 29 from 6-8 p.m. at the Urban League building, located at 1408 North Kingshighway Blvd.