This article first appeared in the St. Louis Beacon, Jan. 7, 2011 - Wealthy financier Rex Sinquefield is retaining the same campaign committee and adopting the same approach that he used last year to attack municipal earnings taxes as he prepares to launch on Friday an initiative-petition drive aimed at his next target: eliminating Missouri's income tax.
Representatives of the group, Let Voters Decide, submitted nine different versions of the initiative-petition proposals at noon Friday, the secretary of state's office said.
Lawyer Marc Ellinger, who submitted the versions, said that each is a variation on the same theme: get rid of Missouri's income tax, which now ranges from 1.5 percent to 6 percent. It would be replaced by a state sales tax of no more than 7 percent. The state sales tax now is 4 percent or 4.225 percent (depending on the item or service) with various local governmental entities adding additional amounts.
All of the initiative petititon proposals get rid of the income tax on individuals. Some versions also repeal corporate income taxes, or the business franchise tax, while other versions leave the business taxes alone. Some repeal state tax credits.
Some of the versions allow sales-tax exemptions for tuition paid for elementary education, high school or college. Some also exempt health-care expenses from the sales tax.
Some phase in a repeal of the income tax over several years, while others repeal it outright on Jan. 1, 2014.
Travis Brown, president of Let Voters Decide, said that later, Let Voters Decide will decide which one -- or ones -- will be used to collect the necessary signatures to get an anti-income tax proposal on the 2012 ballot.
Ellinger said that no initiative-petition drive may be launched at all, if the Missouri Legislature acts and puts a similar proposal on the 2012 ballot to replace the state income tax with a higher sales tax.
Let Voters Decide was the same campaign committee that oversaw last fall's successful statewide passage of Proposition A, which limits earnings taxes to the cities of St. Louis and Kansas City. No other Missouri community can impose an earnings tax, and voters in the cities of Kansas City and St. Louis must vote this spring on whether to retain their earnings tax. If it is retained, the new law requires additional votes every five years.
The group, bankrolled almost entirely by Sinquefield (who spent $11 million), also initially submitted a variety of anti-earnings tax petitions -- each with slight differences -- before settling on one to actually advance by collecting signatures.
More signatures will be needed for the proposal known as the "Fair Tax," because eliminating the state's income tax requires a constitutional amendment. To get on the ballot, advocates will need signatures from roughly 147,000 to almost 160,000 registered voters, in total, from at least six of the state's nine congressional districts. The number of signatures depends on which six districts are selected.
The earnings tax proposal changed state law, not the constitution. The measure needed slightly more than 90,000 signatures -- although Let Voters Decide turned in far more. Voters statewide handily approved Proposition A.
Sinquefield and his allies contend that the "Fair Tax" would over time lead to more economic growth that in turn would generate more non-income taxes. The Show Me Institute, a St.Louis-based free-market think tank partially funded by Sinquefield, has conducted studies that it says show that states without an income tax have stronger economies than Missouri. Many of the states with the most population growth have no income tax.
"It's no secret that (Sinquefield) believes passionately that the best way for (economic) growth...is not to tax their income," Brown said.
Critics contend that the no-income state states cited by the institute, such as Florida and Texas, levy other taxes and benefit from other industries, such as tourism and oil. Most of those states are in the South or Southwest, attracting population, in part, because of their warmer climate.
If the "Fair Tax" plan were to be adopted, opponents say, Missouri sales tax rate would need to be at least 11 percent or more to bring in the same amount of tax revenue, and that a sales tax would fall more heavily on the lower and middle-income residents.
One such critic, the Missouri Budget Project, a nonprofit progressive group, said in a statement Thursday night:
"To make up for revenue lost from the income tax, sales taxes would be applied to a much broader range of goods and services than are currently taxed. The new, expanded sales tax would apply to nearly everything that is purchased, including food, prescription medicine, new cars, and even new homes.
"And it would also apply to all services, like child care, nursing homes and assisted living for seniors, doctor's office visits, legal counseling, and financial services, and much, much more -- even funerals. The new sales tax would be like no other nationwide, and would result in an overall tax increase for 95 percent of Missourians."
"Moreover, if the sales tax rate is capped at 7 percent as reports indicate, the services and infrastructure that provide the foundation for our economy would be jeopardized. Critical programs that represent the state's investment in its workforce, such as education, transportation, and health services would face further cuts, endangering the state's economic recovery. Research on comparable proposals has indicated that a sales tax of 10 to 11 percent would be required to be revenue neutral."
Sinquefield's allies include a number of prominent Republican legislators, including state House Speaker Steve Tilley and new Senate President Pro Tem Rob Mayer. (Sinquefield is the state's single most generous campaign donor, although his recipients hail from both major parties.)
Republican lawmakers are expected to press for legislative passage of some sort of "Fair Tax" proposal this session or in 2012.
If legislative leaders side with him, why is Sinquefield planning an initiative petition drive, which could cost millions of dollars? Brown with Let Voters Decide indicated that Sinquefield and his allies want to make sure that their conception of the Fair Tax gets before the public for discussion. The legislature may pass a version that is very different.
"There are at least two different pathways in our state'' for getting a measure into law, Brown said, adding that the two -- the legislature and the ballot -- aren't always linked.
Left unsaid is the assumption that Gov. Jay Nixon, a Democrat, would veto any measure that the Legislature passed that specifically eliminated the income tax and increased the state's sales tax. Nixon hasn't said much on the subject, but his few comments have generally been critical of the idea.
If Nixon were to veto such a bill, it's unclear if the legislature could override it -- even with the chambers' historically large GOP edges.
An initiative petition skirts the governor as well as state lawmakers.
The Legislature also is considering "joint resolutions'' that would bypass the governor as well, and put a Fair Tax proposal directly on the ballot. But again, such a ballot measure may differ from the version that Sinquefield and his allies would ideally like to see.
Some business groups, especially those representing retail sales, have been critical of the "Fair Tax" idea, predicting that residents in the St. Louis and Kansas City areas would flock across the borders to shop in states with lower sales taxes -- particularly if Missouri's tax ended up in the double digits.
A coalition of major Missouri business organizations issued its top legislative priorities on Wednesday -- and the "Fair Tax" wasn't one of them.
Editor's note: Rex Sinquefield is a donor to the Beacon.
