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It's Moody versus Laffer as battle ramps up over future of Missouri's income tax

This article first appeared in the St. Louis Beacon, Nov. 1, 2011 - Leaders of a new coalition out to retain Missouri's income tax, and block a proposed higher sales tax, said today that their aim is to amass so many allies that wealthy financier Rex Sinquefield and his group drop their effort to get their initiative petition on the November 2012 ballot.

The opposition group -- Coalition for Missouri's Future -- has dubbed the proposed higher sales tax "the Everything Tax."

"Our initial focus is to build the broadest base we could possibly build,'' said Richard Martin, the coalition's co-chair, during a tele-conference Tuesday. "Hopefully, Rex and his base will think twice about moving forward."

But Travis Brown, spokesman for the Sinquefield-funded group, Let Voters Decide, said that's not likely to happen.

"It's inevitable that Missouri have this debate,'' Brown said.

To that end, Let Voters Decide on Wednesday is bringing in economist Arthur Laffer -- a favorite of former President Ronald Reagan -- to refute the opposition's fiscal assertions. Laffer is to headline a public reception at 5:30 p.m., Wed., at the Doubletree Hotel, 16625 Swingley Ridge Road in Chesterfield.

Laffer is known for his "supply side economics'' and backs the idea of taxing spending, not income.

In particular, Laffer's presence appears aimed at countering the political power of the economic criticisms leveled by former Missouri Budget Director James Moody, who worked under former Gov. John Ashcroft, a Republican.

Moody said during the opposition's conference call that the sales tax proposal advanced by Let Voters Decide would raise about $4.6 billion a year -- far short of the $7.9 billion now raised by the state's income tax, which helps fund a sizable chunk of the discretionary portions of the state's budget.

Let Voters Decide is proposing to increase the state's sales tax, now 4 or 4.225 percent, to 7 percent and do away with Missouri's income tax of generally 6 percent. The proposal would restrict local sales taxes to no more than 3 percent.

Moody said that the state sales tax now brings in about $1.8 billion a year. He contended that the Let Voters Decide plan would bring in far less than advocates claim.

In particular, he noted that the initiative-petition proposal exempts significant services from the new sales tax, such as utilities, while expanding the sales tax on other necessities such as food.

Moody said he also objected to the fact that the initiative petition, as a constitutional amendment, would put its exemptions in the Missouri Constitution -- making it harder to change the proposal later.

Moody contended that the new higher sales tax would particularly hurt the elderly since the state already is phasing out the income tax on Social Security and pensions. They would be paying the new higher sales tax, Moody and Martin said.

Brown replied that Moody and his allies have failed to account for the fact that the proposed higher sales tax would apply to more goods and services than Missouri's current sales tax. Currently, said Brown, the state's sales tax applies to only about 25 percent of goods and services, while the proposed larger sales tax would apply to 46 percent.

Brown reaffirmed Let Voters Decide's chief contention that the tax shift would generate jobs. 

Moody disagrees, while other coalition speakers repeated their longstanding assertion that the public -- particularly in border cities like Kansas City and St. Louis --would flock to neighboring states with lower sales taxes for purchases of big-ticket items.

Let Voters Decide already is airing TV and radio spots in outstate Missouri, including Springfield. The ads have yet to run in Kansas City or St. Louis.

While in St. Louis, Laffer is expected to speak to several hundred St. Louis business, political and civic leaders. Brown said the attendees will highlight the growing support for the tax change.

Allies have included some prominent Republican officials in Jefferson City, including Lt. Gov. Peter Kinder, who is expected to run for governor in 2012.

But Martin and Moody contended that politicians will desert the initiative-petition proposal the more they learn about it.  Martin added that the coalition and allied groups expect to "have sufficent resources for a media campaign" should the proposal eliminating the income tax get on the ballot.

The Coalition for Missouri's Future unveiled on Tuesday its list of participating organizations. They include a number of business groups in Kansas City, but so far, not many from St. Louis. Martin said the coalition is in talks with St. Louis-based Civic Progress and the Regional Chamber and Growth Association.

The list includes a number of members of a coalition formed earlier, Missourians for Fair Taxation, notably the Missouri Realtors Association.  Martin said the two umbrella groups plan to work together for their common aim.

The members of the new coalition include:

Missouri National Education Association (MNEA)

Civic Council of Greater Kansas City

Missouri AARP

Missouri School Boards Association

Missouri Association of School Administrators

Missouri State Teachers Association

Missouri Healthcare Association

Missouri Municipal League

Missouri Grocers Association

Greater Kansas City Chamber of Commerce

Missouri Budget Project

Missouri Realtors Association

George K. Baum

Herschend Family Enterprises

Service Employees International Union (SEIU)

AFSCME Local 72

Missouri Association of Secondary School Principals

Missouri Association of Elementary School Principals

Missouri Association of Social Welfare

Missouri Association of School Business Officials

Progress Missouri

League of Women Voters

Missouri Women's Political Caucus

Branson Chamber of Commerce

Table Rock Lake Chamber of Commerce

Missouri Association of CPAs

Jo Mannies is a freelance journalist and former political reporter at St. Louis Public Radio.