St. Louis Metropolitan Statistical Area Tax Study

St. Louis Metropolitan Statistical Area Tax Study November 2016 / Illinois REALTORS / Greater Gateway Association of REALTORS / REALTOR Association of Southwestern Illinois / SIU-Edwardsville

Overview Popular perception of the overall taxes paid by consumers in the Metro East area is that Missouri (St. Louis) is much better to residents’ pocketbooks than Illinois. As a result, the local REALTOR associations wanted to analyze the true total tax burden faced by families in the entire St. Louis Metropolitan statistical area (MSA). Dr. John Foster of the Public Administration and Policy Analysis at Southern Illinois University at Edwardsville conducted the tax analysis.

Study Parameters ● Analyzed all state and local taxes rates. Federal taxes are constant for the entire MSA so those were not calculated into the analysis.

● Applied local tax rates of state and local individual income, residential and personal property, and sales tax burdens to incomes of families of four (2 adults, 2 children).

● Burdens were calculated by income levels including $20,000, $50,000, $75,000, $100,000 and $200,000.

● Assumptions were made on level of housing, cars, other lifestyle amenities based on income.

● Property tax burdens were calculated differently for owners and renters because certain assumptions have to be made on how much renters are paying through rent.

Key Findings 1. In 2014, the overall tax burden was higher for Illinois families than Missouri. 2

2. Applying the lower income tax rate (2015) dramatically reduces the tax burden in Illinois making it a much more competitive.

3. Illinois has a substantially higher property tax rate. ($20k - $283 increase)(($200k - $2,631 increase)

4. Low Income Families tend to have lower income tax burdens in Illinois than Missouri due to the Earned Income Tax Credit

5. Missouri’s progressive income tax (all income over $8k is taxes at 5%) compared to Illinois flat tax (3.75%) gives Illinois an edge that increases relative to income.

6. Illinois residents that work in the city of St. Louis do not realize as much of a decrease on income tax.

7. Homeowners on both sides of the river realize tax benefits compared to renters. Homeownership is a short term gain while building long term wealth.

What Does this Mean for the Metro East area and the entire MSA?

1. Need to change the way we portray Illinois’ Tax Structure and tax culture. Data doesn’t support popular conclusion that Illinois residents are taxed more than Missouri residents.

2. Need to focus on true problems to ensure those are addressed first. We not advocating what those issues are, but our taxes should be portrayed in the proper light to remove that barrier.

3. Homeownership is a smart investment for long term tax advantages and building wealth.

4. We need to maintain these competitive tax rates to ensure employees look to the Illinois side as a viable place to live. Even if a business is located in Illinois employees might avoid it because of taxation fears.

5. Employers look at housing diversification for employees and Illinois housing provides an affordable alternative to some housing in larger cities in the MSA.

6. Need to work to ensure property taxes do not surge or increase dramatically as it could put Illinois at a severe disadvantage. 3

7. Local Leaders need to encourage homeownership through incentivizing homeownership as it encourages local investment and spending. (2010 Economic Impact Study)