Clay County could become first county in Missouri to lower commercial property surtax

CLAY COUNTY, Mo. – Clay County voters will soon have the chance to make their county the first in Missouri to lower its commercial property surcharge rate.

The surcharge is a tax levied at the county level on commercial property, and Clay County’s currently sits at $1.59 for every $100 of assessed valuation of property – the third-highest in Missouri. According to state law, only voters can lower a county’s commercial property surtax.

This, along with continuing economic and inflationary pressures, led the Clay County Commission in July to vote to allow residents to lower the surtax rate to $1.44 for every $100 of assessed valuation of property. Voters will decide the matter, known as Proposition A, on Nov. 8. 

“I think the most impactful reason [to put the vote in front of Clay County residents] was the inherent unfairness to Clay County businesses,” Clay County Presiding Commissioner Jerry Nolte told The Heartlander. 

The commercial property surtax replaced a commercial inventory-based tax in 1985, according to the Show-Me Institute, a think tank focused on taxation and a free-market economy. The below excerpt from David Stokes, the Show-Me Institute’s director of municipal policy, provides some context to the original implementation of the surtax, and what he sees as its biggest issue today:

“If your county had many businesses [in 1985] that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.”

If approved, Clay County’s commercial property surcharge rate would still be tied for the third-highest in the state, but it would at least match neighboring Jackson County’s rate of $1.44. The reduced surtax rate would take effect on July 1, 2023. 

“The modest reduction Clay County is proposing to equalize itself with Jackson County, in my opinion, is very good public policy,” Stokes said.

Nolte agrees the surtax reduction would be a modest move, and highlighted other efforts the area has taken to reduce the negative impacts of the currently flailing economy on businesses and citizens. 

“I think it’s a modest move, but I think it’s an important move,” he said. “One of the things I think is important to do is to put this into context. We as a commission just lowered our general county property tax…that’s for everybody, businesses and citizens. And then prior to that, the Mid-Continent Public Library Board lowered their tax as well.”

In response to critics worried about the lost tax revenue for the county, Nolte pointed to a fact sheet explaining the surtax is only a small fraction of the total property tax revenue collected by Clay County.

“The surtax represents 3.4% of property tax revenue,” the sheet says. “The 10% cut means a 0.34% reduction in money collected.

“So, what we’re looking at here is something that is kind of a general movement to try to give some modicum of tax relief on a lot of different fronts. It’s a good way to fight inflation.”

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