Between 2020 and 2023, St. Louis illegally required nonresident taxpayers who worked remotely for a St. Louis-based business to pay the city’s 1 percent earnings tax. Following several lawsuits, the city finally agreed to a settlement under which it would offer a three-month period for affected taxpayers to file for refunds between July and September of this year. With the refund period now over, the good news for taxpayers is that St. Louis now expects to pay out nearly double what it initially set aside. The bad news is that St. Louis is currently keeping the vast majority of its ill-gotten gains.
In response to St. Louis trying to tuck away a refund period in a brief three-month period buried in the middle of the summer when taxpayers are not thinking about income taxes, NTUF made a concerted effort to inform taxpayers about the refund period and how to go about claiming what they are owed—including media appearances, a line-by-line explainer on how to file a refund claim, and even a billboard right outside St. Louis.
To at least some extent, those efforts have paid off. St. Louis had initially budgeted $21 million for refund payments, but St. Louis has already refunded $36 million. With approximately 1,500 more refund claims left to process, the city now expects refund payments to exceed $40 million.
But that remains a fraction of what St. Louis collected from nonresident taxpayers working remotely between 2020 and 2023. St. Louis had previously claimed that refunds could cost the city as much as $150 million—which would suggest that the city is managing to keep nearly three quarters of what it owes back to taxpayers.
That should be reason enough for the state legislature not to consider this a settled issue. Legislation passed by the state House last year would have created a state mandate for refunds as well as explicitly restricting localities from attempting similar extrajurisdictional tax assessments in the future. Clearly, there remains a need for a similar effort this coming year.
And while the most important goal should be helping taxpayers get back what they are owed from St. Louis, the city’s actions should merit punishment, not reward—and only getting to keep $110 million instead of $150 million is hardly a punishment. Any jurisdiction that so blatanly disregards limitations on its taxing authority to assess burdensome and unjustified obligations on taxpayers must expect a far less lucrative resolution in order to deter such behavior in the future.
Therefore, taxpayers and legislators should be unaffected by St. Louis’s crocodile tears about having to pay back a fraction of the tax revenue it had no authority to collect in the first place. It’s good news that taxpayers got more than St. Louis expected out of its cover refund period, but there remains work to do in Jefferson City.