Rex Sinquefield wants to give Kansas City taxpayers a raise, but it could cost us our cops
So I’m at a downtown coffee shop last week when a silver-haired man in a leather blazer passes my table. His face seems familiar.
“That looks like Rex Sinquefield,” I tell myself.
Sinquefield is a retired fund manager who made a pile of money. He spends his time and bounty advancing free-market principles in Missouri.
He owns a mansion in St. Louis and a 1,000-acre farm in the Ozarks. So what would bring him to a Starbucks in downtown Kansas City on a cold morning in February? Taxes.
Kansas City and St. Louis collect a 1 percent tax on the earnings of everyone who lives and works within city limits. (You probably know this all too well.) Sinquefield detests income taxes. He thinks the state of Missouri should raise money another way. And now, he has dumped $1 million into a campaign to wean St. Louis and Kansas City off their earnings taxes.
Sinquefield spent his time in Kansas City last week meeting with Civic Council representatives, the firefighters union and others, according to lobbyist Woody Cozad. I had finished my coffee by the time Sinquefield arrived, but I decided to linger when he, Cozad and two men in dark suits found a table. (More on that later.)
Sinquefield’s wealth and value system create an interesting dynamic. A man with no standing in this community — beyond the campaign contributions he makes to local candidates — is essentially telling the city to prepare for a day when $200 million vanishes from the annual budget. If running a city were a reality show, then Sinquefield would be the surprise guest star who showed up to blindfold the contestants before the challenge began.
Ultimately, voters will decide the fate of the earnings tax. Sinquefield’s million bucks are paying for signatures to put a question on the fall ballot that would prohibit other cities in Missouri from taxing people’s earnings. If it’s successful, the measure would also give residents of Kansas City and St. Louis the opportunity, at another election, to phase out the existing tax at a rate of one-tenth of 1 percent per year.
In an attempt to brand the repeal as something grassroots and ideologically androgynous, Sinquefield is calling his effort “Let the Voters Decide.” City leaders and their paid hands, meanwhile, will surely look for images of rotting trash bags and burgled windows in their attempt to demonstrate the necessity of the “e-tax,” which also taxes business profits.
At this stage, I’m staking out a position of curiosity.
A city-imposed income tax is an interesting thing, I’ve come to learn. Most states don’t allow one. In places where it’s legal, local governments rely on the tax to varying degrees. Columbus, Ohio, for instance, uses an income tax to provide most services. Last year, votes there increased the tax to 2.5 percent. It sounds like a lot, and it is. At the same time, Columbus doesn’t have the authority to charge sales tax.
Kansas City has a broad tax base. The city taxes property. It taxes sales. It taxes the incomes of residents as well as people who work in the city and live elsewhere.
The e-tax began in 1964. Its original proponents said the money was necessary to keep Kansas City “a first-class city.” Pamphlets described cops leaving their beats for better-paying jobs and trees stricken with Dutch elm disease. “A run-down city runs down business,” went one slogan.
Set originally at 0.5 percent, the e-tax went up to a full percentage point after a vote in 1970. City officials talked about raising it another half-percent in the early 1980s. A councilman, Harold Hamil, said at the time that the city had “every right” to tax workers because of the “special expenses” Kansas City incurs as the metro area’s largest city.
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City boosters said the e-tax was needed to counter inflation. More accurately, its inception represents a principle known as Wagner’s law. Named after a 19th-century German economist, Wagner’s law says that societies demand more services as they grow in affluence. In Kansas City, citizens decided that they were willing to let government expand for the sake of better police protection and trash pickup.
By contrast, Sinquefield believes — with a nearly religious zeal — in limited government. He does not accept the position, for instance, that deregulation played a significant role in the financial system going haywire, a notion that a number of free-market economists have been forced to acknowledge .
The caricature of Sinquefield is that he’s a “starve the beast”-style conservative, someone who wants to deprive government of its resources so completely that it’s doomed to fail. In this scenario, the e-tax represents low-hanging fruit.
What’s peculiar, though, is that his think tank, the Show-Me Institute, has proposed replacing the earnings tax with a tax on land. The idea, oddly enough, originated during the Progressive Movement.
A crank named Henry George, who died in 1897, promoted a tax on land and the abolition of all other taxes in a book called Progress and Poverty. George saw the land tax as a means to ameliorate suffering with the least amount of damage to labor and industry.
The Show-Me Institute issued a policy paper on the land tax in 2007. At the time, I thought it was kind of a fig leaf — the institute must have felt safe proposing this alternative means of taxation with the knowledge that it would be virtually impossible to implement. But over their morning drinks at Starbucks, Sinquefeld, Cozad and the other two men talked about the land tax with apparent sincerity. “It sounds too easy,” Sinquefield said at one point. “We’ve got to get somebody to study this.”
A man whose back was turned to the eavesdropping reporter described a meeting that Team Rex had held with Councilwoman Deb Hermann, who chairs the City Council’s Finance and Audit Committee. The man said Hermann seemed smart and capable, but once the meeting was over, “she went out and started demogoguing” the question of an e-tax repeal.
Those working with Sinquefield seem to be aware that e-tax preservationists will make Sinquefield’s fortune and politics an issue in the coming months. “People have to have a greater enemy than us,” said the Man With His Back to Me.
But Sinquefield’s radical proposition has the potential to lead to an exhilarating discussion about the kind of city that Kansas City wants to be. It will tug the city’s civic leaders in different directions. CEOs who live in Leawood would love to get a 1 percent raise. But can they run a business in a city that struggles to deliver basic services even when the e-tax is in place?
Or take Cozad. His clients include the Kansas City Board of Police Commissioners. It’s Cozad’s job to preserve the police department’s autonomy from City Hall. The police departments in Kansas City and St. Louis are the only two in the nation that answer to a board appointed by the governor.
When I reached him, Cozad wanted to emphasize the democratic spirit of Sinquefield’s efforts (let the voters decide and all that). He opposes the e-tax on the grounds that it repels commerce. “There’s broad agreement that this is a bad tax for cities,” he says.
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Cozad says the city ought to try to find another revenue source if voters ultimately decide to do away with the e-tax.
City officials had better, for the sake of Cozad’s other client. The police department receives 88 percent of its money from the general fund. The general fund receives 37 percent of its money from the e-tax.
The line between a CEO’s paycheck and a cop on the street is short and direct.
