ST. LOUIS — Refunding millions of dollars in earnings taxes to remote workers during the pandemic has cost City Hall far more than anticipated this year.
According to our reporting partners at the St. Louis Post-Dispatch, the city has already refunded $36 million for 2020, 2021, and 2022 to workers who applied for refunds.
The total could reach $40 million by the end of the fiscal year with about 1,500 refund requests still pending processing. That’s nearly double the $21 million officials had budgeted.
The St. Louis Collector of Revenue’s office attributes the higher-than-expected payouts to the unprecedented shift to remote work during the pandemic.
At that time, the office implemented a stricter approach to earnings tax collection, taxing some remote workers who previously would have been exempt. This decision ultimately led to lawsuits and a court ruling earlier this year that forced the city to issue refunds.
To prepare for an anticipated $21 million revenue loss, city leaders had trimmed the budget, cutting vacant positions and scaling back raises for city workers. However, a late surge in refund requests during the summer and fall pushed the cost beyond initial estimates.
Despite these challenges, city officials are optimistic that savings from other parts of the budget may offset the additional cost. Over 1,000 city positions remain unfilled, and salary savings could total as much as $19 million this fiscal year, according to officials.
There’s also some encouraging news for the city’s long-term finances. A drop in refund applications for 2022 compared to prior years suggests that more workers may be returning to their offices in St. Louis, which could help stabilize earnings tax revenue in the future.