Between refunds and renewal vote, earnings tax could hit Kansas City’s budget hard

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KANSAS CITY, Mo. — With many people working from home during the pandemic, Kansas City could see a strain on its budget.

It all has to do with Kansas City’s 1% earnings tax, which residents and nonresidents who work in the city pay. It represents the city’s largest source of revenue, benefiting streets and emergency services.

But right now, it all hangs in the balance.

Nonresidents who’ve been working from home could apply for earnings tax refunds. 

“It’s an opportunity for them to just kind of get some of that excess tax withheld, to get them refunded back to them,” certified public accountant Kyle Nagy said.

Each day worked outside the city is refundable through your taxes.

“It becomes a bit of an exercise and just looking at the calendar and counting days,” XXX said. “Once we have the number of days, the rest of the computation is fairly easy. The city requests that you provide a contact information for a supervisor or someone who can verify your work location.”

“I have faith in our finance department that that will work through that,” Councilman Eric Bunch said. “But I also have faith that we’ve accounted for what potential shortfall this might might bring to us, so we’re prepared.”

But the earnings tax could have an even bigger impact on the city’s budget beyond the pandemic. It’s up for vote next month. On April 6, Kansas Citians will vote on whether to renew the tax for another five years.

The earnings tax makes up roughly 40% of the city’s general fund, an amount Bunch said is vital.

Even if those working from home aren’t paying the earnings tax, Bunch said what Kansas City does receive is greatly needed. If it’s lost, it would be devastating to the city’s budget.

“That is, I would say, an existential threat to the operations of the city,” he said. “And I think that is an important fact to consider is that it does make up such a large portion of our budget that we can’t not renew it.”

The biggest issue is if the tax doesn’t pass this April, due to state law, Kansas City would never be able to get it back.

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