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Sinquefield: Proposed income tax repeal may be delayed until 2014 ballot

This article first appeared in the St. Louis Beacon, Feb. 12, 2012 - Wealthy financier Rex Sinquefield is personally seeking to make the case that eliminating Missouri's income tax, and replacing it with a sales tax, would be an economic boon for the Show Me State.

But Sinquefield, who is bankrolling an initiative-petition drive on the subject, acknowledged Thursday that getting Missourians to go along with such a drastic change in their state's taxation system may take several years and perhaps several elections.

"It's going to be extraordinarily difficult to persuade people that this is the thing to do," Sinquefield said during a lecture he delivered Thursday at Lindenwood University in St. Charles.

"The problem is this is such a wonderful state, the people are so great, it is such an incredibly beautiful state — that a lot of people are so content and happy," he said. "What they don't understand is how this horribly sluggish growth is denying them, and especially their children, opportunities."

Sinquefield and his allies contend that eliminating Missouri's income tax would create job growth by attracting more businesses, which would in turn lead to more state income from sales taxes.

A group he has largely bankrolled, Let Voters Decide, has submitted several initiative petition proposals, in hopes of getting one on this fall's ballot.

Although some details vary, all of the proposals call for eliminating or phasing out the state's 6 percent income tax. The state's current sales tax of 4 or 4.225 percent would be increased to no more than 7 percent. Several petition proposals would cap the combined state and local sales taxes at 10 percent.

On Thursday, Sinquefield's proposal was endorsed by the Missouri Restaurant Association.

"The Missouri Taxpayer Relief Act gives all working Missourians a permanent 6 percent pay raise because state income tax will no longer be subtracted from their paychecks," said Missouri Restaurant Association Chief Executive Officer Bob Bonney. "When families have more take-home pay, they spend more money in their local communities. As our members know, disposable income is the lifeblood of our industry."

Sinquefield's push also has attracted strong opposition. The opponents include coalitions of labor and education groups as well as the real estate industry. The opponents maintain that his proposal would decimate state and local budgets because the proposed sales taxes wouldn't be high enough to replace the income tax.

The critics also contend the change would hurt poor and middle-class Missourians, many of whom they contend would pay more in sales taxes than they currently do in income taxes. Sinquefield disputes that assertion, saying many poor people would pay less.

Gov. Jay Nixon offered circumspect criticism when asked about the tax shift during a luncheon Thursday with reporters in Jefferson City.  "The bottom line is, I don't support raising taxes on groceries and other critical things that families need," the governor said, referring to an increase in the sales tax on food. "I mean, making families pay more for bread and milk doesn't seem like a solid step forward for our economy."

A few protestors gathered outside Sinquefield's lecture decrying what the opponents call the "Everything Tax" (another group calls it the "Almost Everything Tax"), which refers to the broader number of goods and services that would be subject to the higher tax.

"It's going to place the burden of the support and infrastructure on the middle class and on the lower class in this state and take it away from the people who are already well-off," said Alice Klem of the Fort Zumwalt Education Association.

Sinquefield observed Thursday that only about a quarter of business transactions are subject to sales tax now. Under his proposal, he said, the field of taxed goods or services would increase to almost 50 percent.

Blames Income Tax for Population Declines

Sinquefield is the co-founder of Dimension Fund Advisors and a prolific campaign donor, giving to Republicans and Democrats.

Eliminating the state's income tax is among his key issues, along with ending local earnings taxes, creating tax breaks for private schools and ending teacher tenure.

Thursday's speech was an occasion where Sinquefield, not an ally or surrogate, laid out his case. In an interview after his address, Sinquefield said he's always been willing to discuss the issue publicly. "People say you've got to speak to this group or that group — when I'm asked, I try to go," he said.

Sinquefield believes that Missouri's economic performance has been hampered by the income tax because it "makes investments and work less profitable for our residents, and so they move to states where it is more profitable."

He pointed to a map tracking the changes in the U.S. House of Representatives after the 2010 Census. He said that states with no income tax, such as Florida, Texas and Nevada, gained congressional seats, while states with an income tax, including Missouri, Illinois and New York, have lost them.

"They have been growing like weeds for decades and decades, and it's going to continue," Sinquefield said, referring to states without income taxes. "At the beginning of the 20th century, Missouri had 16 members of the House of Representatives. Now we're down to eight. The Northeast used to be dominant in terms of the number of representatives. And they are chronically losing congressional seats, except for New Hampshire, which doesn't have an income tax."

Sinquefield said that his proposal would benefit poor Missourians, who he said often can't afford to move to states without an income tax. Wealthier people can, and do, he said.

Sinquefield also has put his money where his mouth is. He already had donated more than $2.5 million to Let Voters Decide, the committee that's leading the effort to repeal the state's income tax and replace it with a sales tax.

But despite his passionate support, Sinquefield acknowledged that getting voters on board with his plan isn't going to be easy.

Sinquefield said it's still not certain which version of the ballot initiative will make it onto the ballot — or if any proposal will be put up for a statewide vote this year.

"We're looking at the various approaches," Sinquefield said. "And we poll them. And as I said, it's going to be difficult. First of all, we have to see what ballot it's going to be on. We don't know if we're going to be on 2012 or 2014."

He observed that some of the proposals' "fiscal notes," or estimates of the costs to the public, currently face court battles.

Sinquefield said it might take "four or five different proposals before the people are comfortable voting for this."

One option, he said, is to phase the change in over four to six years, gradually decreasing the income tax while increasing the sales tax. Another option is to take a similar approach to the earnings taxes in the St. Louis and Kansas City, where a Sinquefield-financed initiative — now law — requires votes every five years as to whether to retain the taxes.

"Ask Missouri voters would you like the opportunity every two years to vote on lowering your income tax one point and raising the sales tax enough to offset those revenues so it's always revenue neutral," Sinquefield said. "And just have that come up every two years until the income tax is gone. That's another approach."

Sinquefield Criticizes Tenure

Sinquefield fielded a number of questions from the audience, including one about his opposition to teacher tenure at public schools. He is supporting a proposed constitutional amendment to change tenured and teacher evaluations.

"[Competition] does not exist in the K-12 school system in the United States or in Missouri," Sinquefield said. "Can you think of any other business where people have lifetime tenure? Can you think of any other occupation where you can screw up and screw up children's lives permanently and they can't fire you?"

He then pointed to a column by Ralph Voss in the "Unterrified Democrat," a newspaper in Osage County: "He starts off -- and it's something like this -- he said a long time ago, decades ago, the Ku Klux Klan got together and said how we can really hurt the African-American children permanently? How can we ruin their lives? And what they designed was the public school system."

(Click here to view a video of Sinquefield's remarks on tenure.)

Soon afterward, Carl Peterson -- a former member of the Ferguson-Florissant School Board -- criticized Sinquefield's support for eliminating tenure. He maintained that it was unfair to evaluate his wife, who is a teacher, on her students' performance, when many of her students come from backgrounds of neglect and abuse.

"There are 1,300 kids that are homeless in Ferguson-Florissant," Peterson said. "You want my wife who has kids that are beaten and sexually abused at home; you want people who are her students who come from drug-addicted homes. And you want her performance to be based on their scores?"

In response, Sinquefield said "I know a lot of kids that have problems. They go into public schools, they go into parochial schools. Those kids need to be helped."

"But there's nothing wrong with evaluating teachers' performance based on how well those kids improve, not based on their condition when they come in if they make any improvement at all," Sinquefield said.

"And I'll bet you they do. I bet you they make a lot of improvement on these kids. There is research that shows that a good school can overcome — not entirely — but can overcome the effects of a bad home life. It can't erase it, but it can overcome it — a really good school."

Since Thursday's address, Sinquefield has come under repeated fire -- not for his chief topic on taxes, but on his assertions about tenture, and his reference to that column about the KKK.

State Rep. Steve Webb, D-Florissant and head of the Missouri Legislative Black Caucus, was among several legislators on Friday who criticized Sinquefield's remarks regarding tenure and the KKK.

"Not only is this an irresponsible misrepresentation, but it undermines the continuing hard work of parents, children, and educators across the state who strive to make our public schools strong for all Missourians," Webb said. "Like others,  I'm offended that Mr. Sinquefield would attack institutions that have lifted so many up. He owes an apology to every parent who volunteers at school, every child who goes to school eager to learn, and every educator who creates an environment where our  children can realize their potential."

Also critical was Eric Chruchwell, president of the Missouri Association of School Administrators and superintendent of the Palmyra R-I School District, who said Sinquefield should not have repeated the column's KKK reference, which he called "offensive to every student, parent, employee, teacher, administrator, and school board member in a public school."   

"Mr. Sinquefield is the largest political contributor in the state and has donated millions of dollars to politicians and campaigns to  advance his personal agenda," Chruchwell continued. "Whether they have benefited from these contributions or not, it is time for politicians to stand up for public school employees and to denounce this racist comment." 

Friday afternoon, Sinquefield issued an apology for referring to the column that linked the KKK to public schools.

His spokeswoman emphasized that the financier had made reference "to fictional story that was published in the Unterrified Democrat three years ago. It was in no way meant to show disrespect for the teams of great teachers that are doing a great job. It was a highly exaggerated  illustration of the damage that a failing school can do to our children.  Rex shares with the rest of Missouri a deep concern for the future of education."

Said Sinquefield: "I apologize for my reference to a quote from Ralph Voss of the Unterrified Democrat. The public discourse on these issues is too critical for an ill-timed, inappropriate reference. It is my sincere hope that this does not distract us from the important mission of helping all children access a high-quality education."

UPDATE: His comments have  not ended the controversy. On Saturday, the Missouri School Boards Association called on all politicians to return their donations from Sinquefield. The group also cited his reference to that column about the KKK and public schools.

"Mr. Sinquefield's remarks were beyond offensive," says association president Vic Lenz, a school board member in the Lindbergh School District. "His remarks indicate remarkable hostility toward the public schools in Missouri. Candidates for the legislature or state office should not be accepting campaign contributions from him and should return those they have received." End update

Beacon political reporter Jo Mannies contributed information for this article.

Jason Rosenbaum, a freelance journalist in St. Louis, covers state and local government and politics. 

Note: Rex Sinquefield has contributed to the Beacon.

Jason is the politics correspondent for St. Louis Public Radio.