Fair Tax

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But we believe the proposal [to replace Missouri's income tax with a much higher, more expansive sales tax] would be a disruptive and potentially dangerous tax shift, putting more of the burden on lower-income and middle-income residents.

It would lead to a dramatic increase in the state sales tax -- capping it at 7 percent (compared to the current rate of 4.225 percent).

It would lead to a much broader set of goods and services being subject to the sales tax -- chief among them, would be a sales tax on food that could be as high as 5.5 percent.

It could starve state government of needed money -- with critical implications for education funding and a host of other important programs.

And it would limit the ability of local governments to raise money as it would cap the total sales tax at 10 percent. That will inevitably put more pressure on governments to turn to the property tax as a source of revenue.

Image credit: Southwest Missouri Magazine

In today's Jerry Berger post from St. Louis Magazine:

In his family suite [Sunday at the Edward Jones Dome], Rex Sinquefield with his wife, Jeanne, discussed his crusade to let voters decide whether to replace Missouri individual and corporate income taxes with higher sales taxes. "In a few weeks, we'll begin running a significant advertising campaign in southwest Missouri," he said.

How much do you think Rex will have to spend to get public support for extreme proposals to devastate Missouri's state budget and economy to a level at which it won't shorten the careers of the politicians on his payroll?

Today’s Kansas City Star story on efforts in Missouri to replace the income tax with a mega sales tax leave out some important points about how damaging these proposals could be to the state that the paper included in past coverage.

Specifically, in a previous Star story, it was noted that the Missouri state Office of Budget and Planning has said these proposals could leave the state of Missouri with a $1 billion dollar decrease in revenue.

The auditor’s financial analysis includes estimates from the state Office of Budget and Planning that suggest the tax structure as proposed could leave state government under-funded by more than $1 billion.

Also, Missouri state budget expert and former Commissioner of Administration under John Ashcroft Jim Moody has said these proposals could bankrupt the state or lower and middle income Missourians.

One analysis, by lobbyist and state budget expert Jim Moody, describes the sales tax proposals as “fiscally untenable” and suggests they will “either bankrupt the state, or in the alternative, bankrupt the poor and the working lower and middle income classes.”

Proponents of the so-called “Fair Tax” ballot proposals (there are nine such proposed initiatives and counting) think they can slap a makeover on this homely wallflower by calling it something else. They have tried to call it the “Missouri Jobs and Prosperity Act,” but that is laughable on its face because the so-called ‘Fair Tax” would cost Missouri both jobs and prosperity, as respected analyst and former John Ashcroft Commissioner of Administration Jim Moody showed in devastating detail.

Make no mistake – the backers of this ill-conceived attempt to place new sales tax burdens on low- and middle-income Missourians know they are stuck with the so-called “Fair Tax” when all the makeup is washed away by the tears of real Missourians. A national advocate for the so-called “Fair Tax” conceded as much in a blog posting on August 25, 2010, making a hasty correction to his report on the Missouri effort which he referred to throughout as the “Fair Tax”:

Erratum: Its Really the Missouri Jobs and Prosperity Act

In my e-mail from yesterday I referred to the constitutional initiative in Missouri erroneously as the Missouri FairTax, or the Fair Taxation, Constitutional Amendment. The measure indeed was inspired by the FairTax, but it actually has a different name because we state initiatives to be distinct from our federal legislation. The correct name of the Missouri measure is the Missouri Jobs and Prosperity Act. Regrets for the confusion.

~Jim

A stinker by any other name is still a stinker.

Sen. David Pearce (R-Warrensburg) had few kind words for the Rex Sinquefield mega sales tax hike proposals this week at a meeting with his hometown Chamber of Commerce.  Pearce said the plans to expand and hike the state sales tax would "have a tremendous impact," and still not be revenue neutral.  As reported in the Daily Star-Journal:

Pearce said that if the fair tax passes, then churches, schools and non-profits would have to pay state sales taxes - something they do not do now. They would have to pay to make up part of the difference between the amount collected now by income tax versus sales tax.

"It would have a tremendous impact," Pearce said.

Even so, the addition of groups paying sales tax still would not equal state revenue losses if the fair tax passes. Pearce said estimates are that the tax would have to rise another 5 to 12 percent beyond the present level.

If the House passes the proposal, Pearce said, the fair tax likely faces a cool reception in the Senate.

"I don't see a lot of momentum over in the Senate for a fair tax," he said.

h/t JohnCombest.com

The Post-Dispatch's Tim Logan flags a big $135,000 contribution from the Missouri Association of Realtors to the Missourians for Fair Taxation, a committee formed last week to fight Rex Sinquefield's radical plan to destroy the state budget via ballot initiative.

GOP consultant David Barklage worked for the Realtors last year in their Amendment 3 ballot campaign, and it was widely speculated last month that the Realtors' financial support for the anti-Sinquefield effort was at least partially contingent upon Barklage's involvement. 

KTTS reports that Peter Kinder is continuing to distance himself from his previous support for a higher and more expansive state sales tax, now that he's ramping his campaign and now that friend and donor Rex Sinquefield is stepping up his pressure to make it happen.  

Fair Tax Not Backed By Lieutenant Governor

More Republicans turned out this weekend for Missouri's annual Lincoln Days than ever before. Lieutenant Governor Peter Kinder was in Springfield for the event. He told reporters that he does not support the Fair Tax specifically, but says he would like to see Missouri's income tax eventually phased out.

The very short KTTS story doesn't provide any of Kinder's actual language, but it appears here that he wants none of the baggage associated with Sinquefield's plan, but still wants credit for dreaming of eliminating the income tax anyway.

In January, Kinder told listeners of Kansas City's fascist/statist radio station that the devastating analysis of Sinquefield's plans from GOP lobbyist Jim Moody factored into his reasons for opposing the idea as proposed. 

It wasn't too long ago, however, that Kinder was open and honest about his love for Rex's bad, bad ideas.  Here's what the Post-Dispatch reported in April 2007:

Sinquefield's direct approach has won him admiration, even from those wary of his objectives.

"We just click on so many levels, on so many issues," said Lt. Gov. Peter Kinder, who agrees with Sinquefield's quest to abolish Missouri's income tax.

The News-Leader has a story today on a recent strategy session by Rex Sinquefield lobbyist Carl Bearden, former birther Rep. Ed Emery and Springfield area activists allegedly called to figure out "how to talk to others" about their shared desire to replace Missouri's income tax with a much higher sales tax. 

But sadly, the story by reporter Roseann Moring doesn't adequately explain what they're trying to do.   The article summarizes legislative proposals by Rep. Andrew Koenig (R-Winchester) and Sen. Luann Ridgeway (R-Smithville) that would phase out the state's income tax and cap the state sales tax at 7%, but only in the most abstract of terms.  The piece doesn't mention the 7% cap, or even give a hint of what Bearden, Koenig or Ridgeway think the new sales tax rate should be. 

The Columbia Daily Tribune's story on yesterday's committee vote to replace the state's income tax with a much higher and more expansive sales tax has more bad news for Rex Sinquefield's ballot initiatives.  While the committee voted along party lines to pass legislation (HJR8) sponsored by Rep. Andrew Koenig's(R-Winchester) -- despite open concerns about how it will wreak havoc on the state budget -- committee chairman Doug Funderburk (R-St. Peters) said that Sinquefield's ballot initiatives would be the wrong way to overhaul Missouri's tax code. 

Funderburk...said he wants the General Assembly, rather than an initiative campaign, to ask voters to implement the tax overhaul.

“I want to do my job,” he said. If Rex Sinquefield “thinks he needs to do my job, it makes me feel like I didn’t do it.”

House Tax Reform Committee Chairman Doug Funderburk (R-St. Charles) says "he and some other Republicans still have concerns about the financial impact" of Rex Sinquefield's mega sales tax hike proposal, but he and his fellow Republicans voted a legislative version (HJR8) of Rex's plan with an 8-4 vote today. 

It's almost like Funderburk and his colleagues didn't really have the option of not passing the bill, even though they know it will cause enormous budget shortfalls. 

Sen. Luann Ridgeway (R-Smithville) likes the idea of increasing the tax burden for Missouri's working families with a higher sales tax, but she doesn't support Rex Sinquefield's initiative petitions that would wreak havoc on the state budget.  As reported by the Tribune's Rudi Keller:

A legislative supporter of the concept, Sen. Luann Ridgeway, R-Smithville, said the total revision of state taxes required in one step by the initiative proposals is a bad idea. Ridgeway said she is working on rewriting her proposal, which is awaiting a Senate hearing.

The Missouri Constitution should provide a framework for change but not dictate the details, she said.

"It is such a massive debate with all the teeny-tiny moving parts, and proponents are trying to swallow this apple whole," Ridgeway said."“We in this current General Assembly are trying to write rules that over the years need to be implemented. We need to break this apple down into slices."

Ridgeway's proposal to replace Missouri's income tax with a much higher sales tax is SJR1.

The Star is right on with this bit from their weekly Capitol Watch editorial:

Missouri’s auditor: Who me?

The Missouri Constitution gives the state auditor an assignment: In 50 words or less, explain the fiscal impact of a statewide ballot initiative.

St. Louis multimillionaire Rex Sinquefield has put into motion nine petitions seeking a constitutional amendment to eliminate the state income tax and replace it with a greatly increased sales tax. And so it fell to the new Missouri auditor, Tom Schweich, to calculate the impact.

Except he didn’t.

In the Star's story about Auditor Tom Schweich's refusal to give voters his assessment of what Rex Sinquefield's sales tax hike petitions would cost the state, reporter Jason Noble notes that the state Office of Budget and Planning did provide an estimate as to how Rex's plan would impact state revenues: 

A a 7 percent rate, the new tax would generate $6.28 billion in revenues. That’s a little over a billion dollars short of what would be needed for state income to remain constant from current figures.

About $7.29 billion would have to be replaced by the new sales tax, Budget and Planning reported, necessitating a tax rate of 8.13 percent.

Note that this does not include whatever revenue would be required for a prebate scheme that "fair tax" supporters after talk about to address the regressive nature of a higher and more expansive sales tax.  

Auditor Tom Schweich boldly announced today that he's not going to try to help Missouri voters understand the cost of Rex Sinquefield's sales tax hike proposals.  The closest he came to providing an honest assessment of Rex's plans was to say that he can't "predict that the petitions will have little or no fiscal impact on the state."  Impressive stuff, right there.

Sinquefield helped get Schweich elected and has made huge contributions the Republicans around Schweich, of course, so perhaps this isn't all that surprising.  It's also not surprising that Sinquefield's hired guns in Jefferson City were quick to tweet out the news of Schweich's big punt. 

Lobbyist Travis Brown, Sinquefield's top lobbyist and Speaker Steve Tilley business partner:

And unethical hack Carl Bearden, a Sinquefield lobbyist and director of the Sinquefield-funded "United for Missouri" organizations:

Any questions?

Despite Schweich's punt on the issue, Missourians have plenty of research to know how devastating Rex's plans would be.  Last year, the General Assembly's Joint Committee on Tax Policy found that the 7% cap on sales taxes would be far from revenue neutral, and would have to be much higher if a prebate program was instituted.  

We also have the recent analysis of Sinquefield's petitions by Jim Moody, a lobbyist who used to be Governor John Ashcroft's Commissioner of Administration, who found that Rex's plans would "bankrupt the state, or in the alternative, bankrupt the poor and the working lower and middle income classes."  GOP gubernatorial candidate Peter Kinder cited Moody's research in his explanation for why he isn' t endorsing Rex's plans (this year, any way). 

And the Missouri Budget Project and Institute on Taxation & Economic Policy have determined that a sales tax rate with a prebate program would need to be close to 11% to be revenue neutral.  

The St. Louis Review, the official publication of the Archdiocese of St. Louis, writes about the Missouri Catholic Conference's criticism of Rex Sinquefield's plan to hike state sales taxes and gut state services today. In short, Sinquefield's "proposed tax would unduly harm Missouri's working poor."

A former state budget director says a proposed mega-sales tax would shift more of the tax burden to lower and middle-income Missourians. The analysis by James Moody confirms concerns raised by the Missouri Catholic Conference that the proposed tax would unduly harm Missouri's working poor.

Moody, who worked under Republican Gov. John Ashcroft, projects that a tax rate of 15 percent would be required if the proposal is to replace all of the revenue generated by Missouri's existing taxes and provide a "prebate" for people whose incomes are below the poverty level to offset the regressive nature of the proposed tax. Economists consider sales taxes to be regressive because they shift more of the tax burden to lower-income taxpayers...

After a prospective coalition of business and progressive advocates met last week to talk about a coordinated response to Rex Sinquefield's radical plan to destroy the state budget, David Barklage's name emerged as a possible campaign consultant to head up the effort. 

If the idea of David Barklage running the anti-Sinquefield campaign makes you scratch your head, you're not alone.  The GOP consultant and his firm, Strategic Communications Group, will be working for at least two statewide candidates in 2012 on record supporting Rex's sales tax hike pipe dream: Peter Kinder and Steve Tilley.   Kinder recently tried to back away from his outspoken support for the bad idea, but facts are facts.   Speaker Tilley is a strong supporter for the mega sales tax hike, perhaps persuaded by the two hundred thousand clams Rex sent his way for uncontested reelection in 2010.

So how would Barklage effectively advise his candidates on how to dance around their support for a bad idea, all while advising the groups trying to beat back Rex's latest bad idea?  That's a good question.  

Just ask supporters of the 2006 ballot initiative to increase the state's cigarette tax how it worked to have a conflicted John Hancock running their campaign. 

Speaking Friday with Steve Kraske on Kansas City's local fascist/statist/racist radio station, Lt. Governor Peter Kinder was asked to comment on the sales tax hike proposal supported by major donor Rex Sinquefield, Speaker Steve Tilley and a handful of other delusional legislators in Jefferson City.  Perhaps sensing the huge public backlash that will come for any candidate who's trying to destroy state government, Kinder backed away from his previous support for Sinquefield's fair tax sales tax plan.

I have not endorsed to endorse the 'fair tax,' and I have no plans to do so right now.  But I think it's a great debate for our state to have... I have listened to Steve, uh, to Jim Moody's presentations.  He's a good friend, and he is a respected analyst.  And his cautionary notes is one of the reasons why I have not endorsed the 'fair tax.'  I've heard -- but I think it is a good debate for our state to have, and we should continue with the debate.

Listen:

Click here to read Moody's take-down of the Sinquefield sales tax hike plan.

Not so long ago, Kinder was a big fan of the Sinquefield plan to radically alter the state's tax structure to the benefit of the very wealthiest Missourians, like Sinquefield.  For instance, here's what the St. Louis Post-Dispatch reported on April 15, 2007:

Sinquefield's direct approach has won him admiration, even from those wary of his objectives.

"We just click on so many levels, on so many issues," said Lt. Gov. Peter Kinder, who agrees with Sinquefield's quest to abolish Missouri's income tax.

A great editorial in the Post-Dispatch today:

Missourians now have a realistic estimate of what it would cost to replace the state’s individual and corporate income taxes with higher and broader sales taxes: at least 12.25 cents on the dollar. Add average local sales taxes of 2.75 percent, and Missourians would pay 15 cents on the dollar...

[N]one of the various consumption tax proposals filed — either as bills in the Legislature or as initiative petitions — account for the cost of the prebates. The low-end estimate for that is around $2 billion a year. Mr. Moody accepts $3 billion as more realistic.

“The proponents would leave you to believe that you can have a reduced tax base, a relatively low and capped tax rate and a prebate fully funded,” [Mr. James R. Moody, the budget director and director of the Office of Administration for Missouri Gov. John Ashcroft] writes. “That notion, however, is pure fantasy, and a basic ‘bait and switch’ tactic.”

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Speaking Wednesday night at a Webster University forum hosted by former Governor Bob Holden, Senate President Pro Tem Rob Mayer (R-Dexter) told audience members that he has "a lot of concerns" about Rex Sinquefield's plan to hike sales taxes while inflicting huge damage to the state budget, and said that he does not expect a legislative version of Sinquefield's proposal will pass this session.

Here's video of the relevant exchange from Show Me Progress.  Mayer is on the left, Holden is in the middle and Missouri State Budget Director Linda Luebbering is on the right.

A partial transcript:

MAYER: There's a lot of things that I have concerns about that, that 'fair tax.' And I probably shouldn't be this frank and candid with you, but I can't see us passing that 'fair tax' in this session. Now, I'm just one Senator and I probably shouldn't make that kind of statement, but there's a lot of details in that tax, in that proposal, that concern me. And you make a good, you ask a good question-- how much does the sales tax have to be? You know, they talked about seven and a half percent or eight percent. But just, what, this last year, the realtors I guess, passed, wasn't it some time of petition that would exclude them from that. And then, you know, then you start taxing attorneys and CPA services. And you know, then you get into this issue, well, certain ones want to be exempted out. And then everybody else wants to be exempted out. And before long, you're talking about ten, twelve, thirteen percent. So, I mean, the concept intrigues me, but for me, there's got be be a lot -- I've got to have a lot of answers.

A new letter to Auditor Tom Schweich from former Governor John Ashcroft's Commissioner of Administration, Jim Moody, slams Rex Sinquefield's initiative petitions to hike the state's sales tax as "fiscally untenable" proposals that would bankrupt the state or Missouri's middle and working classes. 

The Star and Tribune have stories on Moody's letter, sent on behalf of Missourians Against Higher Sales Taxes, which asks the Auditor to produce sound fiscal notes on the petitions that accurately predict the devastating impact they'd have if enacted. 

From the letter:

We believe that a sound analysis by your office will reach the conclusion that we have reached—that is, all of these petitions are fiscally untenable. They will either bankrupt the state, or in the alternative, bankrupt the poor and the working lower and middle income classes...

As we will explain in our analysis below, proponents of the increased consumption tax have been using calculations that are simply wrong on their face. They have all calculated a rate that is too low in determining the real consumption tax rate, primarily because they have overstated the taxable base subject to the increased consumption tax...

The proponents would leave you to believe that you can have a reduced tax base, a relatively low and capped tax rate, and a prebate fully funded. That notion, however, is a pure fantasy, and a basic “bait and switch” tactic. The “bait and switch” would attempt to make you believe that these three components are not absolutely inter-related. The 7% cap is a gimmick to get around the significant problems with these initiative petitions.

Sinquefield is obviously a major GOP donor -- and provided financial backing for Schweich in his 2010 campaign - and the Auditor's actions on these petitions will provide an early indication of whether he can be the independent and honest official he promised to be (when he wasn't promising to be a hyper-partisan auditor, of course). 

Moody's full letter, as made public by the Star, is embedded below the jump.