Two days after the Missouri Legislature convened on Jan. 5, one of Rex Sinquefield’s numberless minions filed nine, count ’em, nine initiative petitions with the Secretary of State’s office. They differ in details, but each of the nine would let voters decide whether to replace the state’s individual and corporate income taxes with higher and broader sales taxes.
Mr. Sinquefield’s theological aversion to income taxes is well known. The retired investment fund co-founder spent $11.7 million last year to convince the state’s voters to require St. Louis and Kansas City to put their 1 percent earnings tax to a vote every five years, starting this spring.
He has been unapologetic about spending so much money to affect state policy, believing utterly in the wisdom of the marketplace — a philosophy that helped him make his fortune — and the deleterious effects of income taxes.
So, even though the Legislature itself this year will debate putting a “Fair Tax” amendment before voters next year, Mr. Sinquefield apparently decided that a show of force was in order.
By filing his petitions a year early, he served notice on lawmakers that should they fail to put a “Fair Tax” amendment on the ballot, he’ll send his professional signature collectors into the field and do it himself.
These tactics are tantamount to rolling trebuchets up to a medieval castle and ordering it to surrender.
Fair tax proponents argue that taxes on income destroy incentive. Why build a company in Missouri, with its 6.25 percent corporate income tax and 6 percent individual rate, when you could build in, say, Texas, which levies no income taxes at all?
Far better, they say, to tax consumption. Missouri’s Fair Tax proposal, and Mr. Sinquefield’s nine initiative petitions, all contemplate increasing the current state sales tax rate of 4.225 percent to 7 percent. Depending on where you shop, you’d pay another 1 to 5 cents in local sales taxes. In the city of St. Louis, for example, the combined sales tax rate would go from 9.241 cents to 12.016 cents.
The maximum sales tax in Texas, by the way, is 8.25 percent, of which the state’s take is 6.25 percent.
In Missouri, really poor people would get a “prebate,” a check intended to cover the added tax on essential goods and services.
Trouble is, even if you doubled the state sales tax rate to 8.45 percent (making the total sales tax in St. Louis city, for example, 13.461 cents), it still would leave Missouri more than $1.3 billion short of matching the $4.69 billion in individual and corporate taxes raised in fiscal 2010.
Mr. Sinquefield and the fair tax mavens would address that by broadening the reach of the sales tax to cover services, not just goods. Go to the doctor, pay a sales tax. Fix your car, pay a sales tax. Pay the day-care provider, add a sales tax. Get your prescription filled, pay a sales tax.
This tax is “fair,” you see, because the tycoon would pay the same rate to get his Mercedes fixed as the working guy would pay to get his beater fixed.
The trick in the fair tax is what services get exempted. Don’t think lobbyists aren’t already lining up.
The fair tax is a bad idea that, as far as we can tell, has only one guy really, really excited. Sadly, that might be enough.
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