Graham Renz

Saint Louis is beating out cities like New York, Los Angeles, and San Francisco in one very important respect. No, it’s not in job creation, economic growth, or public safety. Saint Louis is on the rise in a very different respect.

The Gateway City is now home to the 13th-highest base sales tax rate of all major U.S. cities. Yes, Saint Louis has a higher sales tax rate than New York City (9%), Los Angeles (9%), and San Francisco (8.75%).

With city voters’ approval of Proposition 1—a half-percent sales tax for MetroLink expansion and other “economic development” projects—the base sales tax rate in Saint Louis will rise to 9.179 percent from 8.679 percent. While that might not sound like much, those nickels and dimes add up for families struggling to make ends meet. For instance, if the median city household spends 10 percent of its income on goods in the city, the recent hike amounts to more than $175 in extra taxes annually. Perhaps wealthy denizens of the Central West End can afford that burden, but many in less affluent parts of the city cannot.

Unfortunately, the city’s base sales tax doesn’t even tell the whole story. Saint Louis is littered with dozens of shadowy special taxing districts, such as transportation development districts (TDDs) and community improvement districts (CIDs), that charge sales taxes of their own. TDDs and CIDs can each charge up to a one-percent sales tax. When you stack a TDD and CID on top of one Saint Louis’s base sales tax, you could be paying more than 11 percent in sales tax! Add on the city’s 1.5-percent restaurant tax, and diners in the city will soon be paying more than 12 percent in taxes on their purchases.

Some cities have high sales tax rates to compensate for low property or income taxes. For instance, in certain southern cities, policymakers have decided to fund public services through consumption taxes (e.g., sales taxes) rather than property or income taxes. But Saint Louis doesn’t have low property taxes to compensate for, and it has both an earnings tax and a payroll tax! Sure, the city only collects property taxes on 60% of real property by value, but that’s in part because the city owns tens of thousands of properties and has engaged in decades of generous tax giveaways. None of Saint Louis taxes is low.

Is the additional tax resulting from the passage of Prop 1 at least worth it? Almost certainly not. The North–South MetroLink line it’s slated to fund won’t be built, even in the best-case scenario, for at least a decade. Assuming the route is eventually built though, promises that it will lead to economic revitalization don’t align with past experience. After two decades to work its magic, light rail has utterly failed to keep people and jobs downtown or spur the ever-elusive “transit-oriented development.” In reality, the approval of Prop 1 simply means that those who can least afford the burden of extra taxes will pay for a luxury amenity designed to lure wealthy suburbanites out of their cars.

While there is no sales tax “ceiling,” voters will only put up with so much, and residents and businesses can only afford so much. Before policymakers propose another pie-in-the-sky project, they should consider if the taxpayer piggybank they’ve grown accustomed to raiding will always be there.

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About the Author

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Graham Renz

Graham Renz is a policy researcher at the Show-Me Institute.