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Call to end St. Louis earnings tax shows one millionaire's political reach.

Millionaire and retired investment banker Rex Sinquefield is currently in the process of single-handedly spear-heading the cause to end the one-percent earnings tax that provides about a third of St. Louis City's total revenue, or approximately the cost of running the entire St. Louis Police Department. Kansas City, the only other city in Missouri with an earnings tax, would also lose about the same amount.

Limited media coverage has suggested that Sinquefield's successful gathering of 200,000 signatures in support of a state vote to remove the tax is good for democracy, while media outlets such as St. Louis Public Radio and the St. Louis Business Journal, have called Sinquefield himself a "philanthropist" and "benefactor."

What Sinquefield has in fact accomplished is the curtailing of the rules in the attempt to fit as many politicians into his silk-lined pockets as possible. His actions are counter to democracy in that he is attempting to drown out opposing voices by throwing 100 times more than the legal limit in financial contributions into political campaigns that side in his favor. As a county resident who has businesses in the city, Sinquefield's personal agenda to avoid a one-percent city tax has become a public issue that could negatively affect the hundreds of thousands of citizens living and working in St. Louis City.

Sinquefield has circumvented the laws regarding how much an individual can contribute to a cause or politician by creating 100 political action committees (PACs) and then making himself the president of all of them and using them to make large donations. The Missouri Citizen Education Fund published two reports, one in October 2007 and one in June 2008, detailing the political contributions of Sinquefield.

The Fund found that "Rex Sinquefield created 100 new [PACs] in September 2007. The formation of these PACs allows him to legally contribute I00 times the legal limit to the candidate or officials of his choice. Sinquefield...acknowledges that he is skirting Missouri's campaign donations limits by setting up 100 [PACs] so each can donate the maximum to favored candidates."

His money buys support

Sinquefield has shown his political sway by forcing the measure to end the earnings tax in Kansas City and St. Louis onto the state ballot. According to KTVI-FOX2 reporter Charles Jaco, Sinquefield has "donated heavily to politicians like Mayor Slay and Senator Kit Bond."

Mayor Slay, who told the St. Louis Post-Dispatch on January 18, 2010 that "Getting rid of the tax without finding another source of revenue would be devastating," is now speaking out against the tax that will make or break his city.

According to reporter Dave Helling at the Kansas City Star, Sinquefield has personally spent $1.75 million on the petition drive so far. Let Voters Decide, the organization heading up the petition to remove the tax and founded by Sinquefield, paid a private company more than $575,000 to gather the petition signatures.

The "experts" fighting for Sinquefield's cause, such as Joseph Haslag of the Show-Me Institute, and Mark Ellinger of Let Voters Decide, work directly for him, but it appears as though these supposed experts are coming from independent organizations because it is not mentioned that Sinquefield is founder and president of these organizations.

Columnist David Nicklaus of the St. Louis Post-Dispatch, in his article entitled "City Earnings Tax Debate Helps Region" pits two supposed experts against each other as though they both have credible, relatively objective arguments; however, the debate is between Dr. Jack Strauss, economist and Director of the Simon Center for Regional Forecasting at St. Louis University, versus Joseph Haslag, who works for the Show-Me Institute, of which Sinquefield is president.

No plan to replace funds

If this tax is abandoned, the infrastructure of St. Louis and Kansas City will suffer greatly, but no one is seriously proposing any way to replace the money. Instead, a vague acknowledgement that the tax will have to be replaced somehow is mentioned as an afterthought. Mark Ellinger, a spokesperson for Let Voters Decide, told Paul Schankman of FOX2 News that, "If they choose to discontinue [the earnings tax] then there certainly needs to be a plan. City leadership, with all due respect, can come up with a plan."

In other words, it is not Let Voters Decide's problem; it is the "city leadership's" problem. These same city leaders will have little or no say in whether the earnings tax will be abandoned since this measure will be put to a state vote rather than a city vote.

Some ideas that Sinquefield's representatives have off-handedly thrown around to replace the earnings tax are either a large increase in sales taxes or in property taxes. An increase in the sales tax to as much as 12 percent is not going to convince new businesses to move to the city; furthermore, flat taxes are harder on the poor since the percentage is disproportionate to each person's earnings.

Property taxes are also a bad idea. The reason St. Louis City originally began collecting earnings taxes is because there is such a large number of people who work in St. Louis City but live in the county, so all of the money they make in the city goes to the county in the form of county property taxes.

There have been no media reports featuring any St. Louis businesses speaking out against the tax, and studies show that new businesses care much more that a city has a healthy infrastructure than if they have a one-percent earnings tax for employees. There is abundant evidence suggesting that businesses choose their locations based on the following criteria, in order of importance:

1. Skilled workforce

2. Limited bureaucracy

3. Infrastructure

4. Quality of life factors (e.g. crime and climate)

5. Cost of doing business (e.g. housing, utilities, taxes)

The infrastructure of St. Louis is already shaky, and the elimination of one third of the city's funding could help destroy it. St. Louis is already one of the most dangerous cities in the country, and such a dramatic reduction in funding will surely affect the number of police officers and fire fighters available. Surely businesses would rather pay one-percent in taxes for the sake of a safer environment in which to work.

St. Louis City and Kansas City are both in grave danger as a result of this one man's actions, yet local media outlets have seemed unconcerned at best and completely duped at worst. No one stops to wonder, for example, why the mayor of St. Louis would suddenly become opposed to an uncontroversial tax about which businesses have not complained and which he claimed was necessary only four months earlier.

No one considers who is behind organizations like Let Voters Decide and the Show-Me Institute, or why this particular measure has such a flood of funding when so many others like it fall by the wayside due to a lack of finances. No one stops to envision what a St. Louis with a third less funding would look and feel like.

Interestingly, Kansas City reporters such as those mentioned above seem to have developed a more balanced and researched opinion of Sinquefield and the measure to end the tax. Mayor Mark Funkhouser of Kansas City has spoken out against ending the tax, while St. Louis reporters and politicians alike remain either mute on the subject or in support of the "philanthropist's" contributions.

Sinquefield has not spurred a healthy debate, as many of the limited articles on the subject seem to suggest, but is simply using his money to control as many people as possible. With the media's combination of underreporting and misreporting, the story of the earnings tax has become nothing more than free PR for Sinquefield. And the last thing this guy needs is a hand-out.

Sinquefield Profile

Political writer Virginia Young of the St. Louis Post-Dispatch did a long-overdue profile of Rex Sinquefield on June 27 saying he's become a household name in Missouri by plowing millions into state and local candidates and causes. Here's some of the information she gathered on Sinquefield, 65.

He became rich through his firm in California that managed institutional investment funds. He is described as having a free-market philosophy with more individual freedom from government regulation.

After retiring in 2005, he came back to St. Louis, where he was raised (spent six years in an orphanage). He's spent nearly $12 million on state and local political contributions, more than half of that on his campaign to have statewide voters scrap the earnings taxes in St. Louis and Kansas City. He believes this will improve the business climate.

He has a phalanx of lobbyists, public relations staffers and his favorite think tank or academic experts. With no limit on campaign contributions he writes checks of 825,000 to $50,000 to state and local politicians, such as Mayor Francis Slay. Wining and dining lawmakers is part of his program. His public relations effort is headed by Laura Slay, a cousin of the mayor.

Sinquefield's scheme to bypass the legislature and go straight to the voters in the Nov. 2 election will no doubt be certified by the secretary of state because of the excess signatures on his petitions. If voters approve, the earnings taxes would be phased out over 11 years and could not be reinstated.

He has off-handedly suggested replacement of the earnings tax revenue by increasing sales and property taxes and perhaps selling the city-owned Lambert Airport. "They've got almost 11 years to figure this out," he was quoted.

Sinquefield has also been pushing legislators to eliminate the Missouri income tax and possibly replacing the revenue with a broader sales tax. He also favors having the state provide education tax credits to parents who send their children to private schools.

Jessica Bellomo is Director of the International Visitor Leadership Program for the World Affairs Council She wrote this article for a graduate course at Webster University.
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Title Annotation:St. Louis, Missouri
Author:Bellomo, Jessica
Publication:St. Louis Journalism Review
Geographic Code:1U4MO
Date:Jul 1, 2010
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