Taxation Law

John P. Barrie, Esquire

Personal Income Tax - Kansas City Earnings Tax Upheld. Dujakovich v. Carnahan, No. 92062 (Mo. banc, July 3, 2012) Draper, J.
In November 2010, state voters approved Proposition A, requiring cities with earnings taxes to seek re-approval of those taxes every five years. Residents of Kansas City voted in April 2011 to reauthorize the city’s earnings tax. The plaintiffs filed a declaratory judgment action in circuit court to challenge the constitutionality of the reauthorization and the circuit court dismissed the taxpayers’ action, finding the reauthorization procedures constitutional under the Missouri Constitution. Plaintiffs appealed the dismissal to the Supreme Court.

Dismissal Affirmed. The Supreme Court found that the reauthorization and local election process were constitutionally valid. In so ruling, the court rejected the taxpayers’ arguments that the Missouri constitution was violated by amending a city charter through a statewide petition and by imposing an unfunded mandate by having the cities fund the elections, finding that the city’s charter was not amended by Proposition A and that the city’s  decision to continue to maintain the tax was discretionary (no mandate requiring an election). The Court also found no violation of the Hancock Amendment.