Very rich Rex Sinquefield is getting ready for an unholy war against the poor and middle class; his objective: the unFair Tax. Right now he’s busily deploying his proxies, among them Missouri House Speaker Steve Tilley who, along with sundry other foot-soldiers in the Missouri legislature, is seriously in hock to Sinquefield for big chunks of campaign funding. The brute force brigade, known locally as the Let Voters Decide Campaign Committee, is simultaneously taking its place on the battlefield with the filing of not one, but nine versions of a petition for a proposed constitutional amendment that would abolish the income tax and substitute one or another version of a regressive sales tax, deceptively labeled a “fair” tax, to be applied to a vastly expanded body of goods and services. (The differences between the nine versions are summarized in this St. Louis Beacon article.) King Rex is a strategist; he knows to cover his rear flank should the legislative gambit fail to pay off.
I’ve written about why the unFair Tax is such a bad idea here and here; now that it’s coming down the pike and we are dealing with the particulars of Sinquefield’s proposal, mainstream outlets are also piping up (see, for instance this editorial in the St. Louis Post-Dispatch). Essentially the arguments against Sinquefield’s unFair Tax proposal boil down to the following:
1. The unFair Tax is not revenue neutral and the state would lose money. To make a sales tax/income tax swap an even-steven proposition would entail prohibitively high sales taxes.
2. Revenue from Missouri’s already low income taxes is currently inadequate to meet the needs of the state. If the unFair Tax is enacted as proposed by Sinquefield et al., it would truly decimate state services – and things are already pretty grim on that front. There’s a reason why CNBC’s Top States for Business Survey ranks Missouri 49th for quality of life.
3. The unFair Tax will create a toxic environment. It’s obvious that higher sales taxes would seriously impact those with lower incomes. Businesses in border areas could suffer since those of us who can do so will most likely travel out of state when it comes time to make major purchases. To move into the realm of the anecdotal and personal, I would imagine that when it comes time for my husband to retire, should the unFair Tax prevail, we probably won’t be staying in Missouri – heck, we might even look for a new house on the Illinois side of the river long before retirement. And I bet we won’t be alone; plenty of those who have the option to do so may just head for those nearby hills outside Missouri.
4. Since the proposal envisions exemptions from sales tax for some selected set of services, it doesn’t take a genius to see an opening for some very happy lobbyists and the concomitant nasty corruption.
5. There is no upside – the claim that eliminating state income tax translates into prosperity has been discredited over and over. Take for instance the much touted example of Texas. Unfortunately, it seems that those stories about streets paved with gold in the Lone Star State were fictional; Texas, with a looming $18 billion deficit, is teetering on the edge of bankruptcy. And even worse for the anti-tax clique, Texas’ governor and big-time hypocrite, Rick Perry, has been busy for the past couple of years plugging holes in the state budget with the federal stimulus money against which he so loudly harangued – making things look a lot
rosier less thorny than they actually were among the yellow roses of Texas.
6. The most important reason to reject the unfair sales tax is that it is so – wait for it – unfair. Rex Sinquefield wants the working people of Missouri to carry rich men on their backs. There are few cases where one can create wealth without leveraging the educational and physical infrastructure that our taxes provide. Those who make money do so because they have access to an educated workforce, transportation systems, and other elements of publicly provided infrastructure. It is not fair for those who have parlayed those tools into big bucks to weasel out of paying for their use – which is just what Sinquefield’s unfair sales tax would permit. Take a look at the following chart* which gives one a picture of how state and local taxes are actually apportioned:
It’s clear who’s carrying the weight of sales taxes here – and it isn’t the likes of Daddy Warbucks Sinquefield. Now imagine what the chart would look like if income taxes were eliminated and the sales taxes were increased across the board. Did you say regressive? Just before you fainted? All I know is that I’m sure as hell not going to sit idly by while King Rex and his pals try to get a free ride at my expense. And if you want to call this class war, well go ahead. As far as I’m concerned, I know who fired the first volley.
*Chart from “Who Pays?” (PDF), prepared by Institute on Taxation and Economic Policy.