ST. LOUIS 鈥 The city is in danger of losing as much as $150 million in earnings tax revenue.
The city could be forced, if a recent court ruling stands, to refund between $25 million and $50 million per year in earnings taxes charged to nonresidents who started working from home during the pandemic over the past three years, according to the 最新杏吧原创 tax collector鈥檚 office.
The office of Collector of Revenue Gregory F.X. Daly would not estimate future losses on the earnings tax, which now brings in close to $200 million per year for marquee city services like policing and fire protection. But with more people working from home now than before the pandemic, the city would almost certainly see a drop in the coming years, too.
鈥淭hat could be catastrophic,鈥 said Tom Oldenburg, an alderman in 最新杏吧原创 Hills, Southampton and other nearby neighborhoods. 鈥淗oly cow.鈥
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The initial loss alone would almost certainly force difficult decisions: $75 million is enough to cover a third of this year鈥檚 police department budget, or just about the entire fire department budget. And $150 million is more than the budgets for the Streets Department, the Health Department, and the Parks, Recreation and Forestry Department combined.
Officials could use federal pandemic aid, but much of that is already assigned to programs aimed at revitalizing the city by reducing violent crime, lifting up the poor, and rebuilding long-struggling city neighborhoods. They could use part of the $250 million from the Rams settlement, but that would change Mayor Tishaura O. Jones鈥 plans to use the money to 鈥渕ake long-term, transformational change in our communities for future generations.鈥
Nick Desideri, a spokesman for Jones, declined comment Tuesday on preparations for a potential impact.
Alderman Joe Vaccaro, of Lindenwood Park, said the city should appeal the ruling in hopes it never has to pay. 鈥淚 would appeal it for the next 1,000 years,鈥 he said. Oldenburg said the city should prepare for the worst, and start looking at what federal pandemic aid can be reallocated.
But David Stokes, a municipal policy analyst at the libertarian Show-Me Institute, said the city should use the opportunity to rethink the tax itself, which his group says makes the city less attractive to workers and businesses. 鈥淭he city needs to move out of the earnings tax game for a whole lot of reasons,鈥 he said. 鈥淭his may make it easier.鈥
The case in question has been winding its way through the courts since early 2021, shortly after plaintiffs Nicholas Oar and Kos Semonski, of St. Charles County, and Mark Boles, of 最新杏吧原创 County, were denied earnings tax refunds for 2020. In previous years, the city had issued rebates to Boles, Semonski, and thousands of others, for days they traveled and worked outside 最新杏吧原创 鈥 it paid out $2.9 million to an estimated 4,000 people in the year before the pandemic hit.
But in 2020, whole offices emptied to slow the spread of the coronavirus, and many high-income, white-collar workers traded commuting downtown for walking downstairs.
Daly, the tax collector, said in June 2020 that the pandemic had brought about a 鈥渨hole different set of circumstances鈥 from previous years. Daly reasoned that workers were still working for companies based in the city, using the remote working software provided from those bases. And he started refusing refunds.
Then-Deputy Collector Tom Vollmer later elaborated to state lawmakers who disagreed with the change that Daly鈥檚 office adjusted policy because of the amount of revenue it expected to lose.
The city reviewed the statute and decided, 鈥淚t鈥檚 an earnings tax, people are earning money, so we are allowed to tax them for earning money,鈥 Vollmer told lawmakers at a March 2021 hearing.
Last January, attorneys for Daly鈥檚 office convinced a judge to dismiss much of the plaintiffs鈥 lawsuit on procedural grounds, which pushed off a class-action threat that could have added many more claims to the case.
But when a new judge examined the collector鈥檚 pandemic policy on remote work, he found the explanation wanting, and ruled last week against Daly.
The law allowing for an earnings tax covers work 鈥渞endered in鈥 the city, not 鈥渞endered into鈥 it, wrote 最新杏吧原创 Circuit Judge Jason Sengheiser. He ordered the city to pay back the plaintiffs, who by then numbered six.
Mark Milton, an attorney for the plaintiffs, said he would again be pushing for a class action suit.
Susan Ryan, a spokeswoman for the Collector鈥檚 Office, has said the office remains confident in its position barring refunds for remote workers. It has yet to remove language notifying the public of the policy from its website.
But no appeal has been filed yet.
Bevis Schock, another attorney for the plaintiffs, said Tuesday he expects to hear from his counterparts soon to talk about what鈥檚 next.
鈥淪ometimes things can be worked out,鈥 Schock said. 鈥淥ther times, it鈥檚 a battle to the death.鈥
Refund suit: A judge has ruled that 最新杏吧原创 improperly refused earnings tax refunds to six people who worked from homes outside the city. Jim Gallagher and David Nicklaus say the case could lead to refunds for thousands more workers.
