The Missouri Senate Ways and Means Committee approved legislation that would phase out personal property tax in favor of real estate tax, according to media reports.
Sponsored by Senator Bill Eigel (R-Weldon Spring), critics are concerned that eliminating personal property tax would leave municipalities with a deficit in revenues to pay for school, police, and fire services.
“What we have done is set it up to phase out personal property taxes over 5 years. As we phase it out, the increases we are seeing in real estate taxes will more than makeup for it,” Eigel told the St. Louis Record.
Eigel believes there is more than enough revenue from real estate tax to cover the gap in income that phasing out personal property tax would create.
“This is a great opportunity to move away from personal property taxes just like 29 other states have done,” Eigel said in an interview.
Personal property taxes rake in some $1.4 billion annually compared to $5 billion in real estate taxes, according to Eigel’s calculations, and real estate taxes make up to 80% of all local revenues compared to 20% from personal property taxes.
“If we did nothing about personal property taxes, we are still paying real estate taxes,” he said. “Either way you are paying more because of the growth in real estate taxes.”
Eigel added that property assessments have been increasing by more than 10% in St. Charles County and more than 20% in St. Louis County on average per year.
“Real estate taxes are increasing based on assessment values,” Eigel said. “What’s driving the rise in assessment values is market demand. As prices rise due to inflation, it increases prices and assessments. It’s a hot real estate market. With those increasing assessments, there are more tax dollars from real estate taxes.”
The St. Louis Post Dispatch reported that the proposal would cut personal property taxes by 25% in 2022, 19% in 2023, 13% in 2024, 7% in 2025, and one-thousandth of a percent in following years.
"It passed out of the Ways and Means Committee last week and now it's moving to debate on the Senate floor," Eigel said. "If it survives debate, it will be voted on by the Senate, and then it will go to the House."