Letter To Editor in the Kansas City Star

The Kansas City Star kindly published a letter to the editor from us the other day on the earnings tax. Our letter was in response to one of their editorials. Thanks to John Combest for linking to the letter. Because the letter is so short, it is reprinted below. Enjoy (if reading letters to the editor about taxation on political blogs is the type of thing you enjoy):

The Star’s Sept. 29 editorial, “Voters spoke: Don’t kill e-tax or hike debt levy,” criticized outgoing Kansas City Federal Reserve chairman Tom Hoenig for recommending that Kansas City eliminate its earnings tax. The editorial stated Dr. Hoenig’s comments weren’t backed up with facts.

All the “facts” Dr. Hoenig needs is that as a PhD economist who has spent 38 years with the Kansas City Fed, he knows that Kansas City’s earnings tax harms economic growth in the city. Studies document the harm local earnings taxes have on economic growth, including three relating to Kansas City by Missouri’s Show-Me Institute (which did recommend a way to replace the tax).

Even though a large majority of Kansas City voters chose to keep the tax, that does not prove those studies or Dr. Hoenig wrong. It proves that the people of Kansas City wanted to keep the tax for a variety of reasons, which is entirely their right.

But good economics and popular public policy don’t always go together, which is exactly what Dr. Hoenig has been trying to warn us about at the national level for the last three years as well.