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Think Again: Billionaire Knows Best

Proposition A could impose one man's tax philosophy on an entire state.

Photograph by Whitney Curtis

Ever on the cutting edge of social progress, the people of Missouri are poised to outdo themselves next month by voting into law a truly revolutionary concept.

Call it Anti-Taxation Without Representation.

Barring a rare outbreak of common sense, voters may respond to their antitax reflexes and approve Proposition A, a measure that would do two things:

  • Require voters in St. Louis and Kansas City to hold referenda on whether to keep their city earnings taxes
  • Forbid the voters of all other cities in the state from ever enacting a local earnings tax in their own communities.

This is one of the most undemocratic exercises of democracy on record. People largely not affected by two cities’ taxation strategies are about to walk those cities to the edge of a fiscal cliff by forcing them to consider losing more than one-third of their revenues for police, fire, ambulance, and other services, with no alternative in place.

Meanwhile—and really even worse—all of us in Missouri could end up telling the people living in places like Columbia or Springfield or Cape Girardeau or St. Joseph that they can never consider using a revenue source that is employed by something on the order of one-quarter of major American cities.

This sounds like something the Tea Party would think of. But it isn’t.

No, this governance monster was created in the political laboratory of a billionaire named Rex Sinquefield, a native St. Louisan who left town and amassed an enormous fortune with theories on how to beat the stock market by indexing the S&P 500.

(His story was well told in these pages in February 2009 and can be accessed here.)

Sinquefield has almost single-handedly bankrolled the campaign for Proposition A, reportedly donating $7.32 million to an entity created to get it passed. In one of the all-time great moments of irony, Sinquefield (or some underling) decided to call this entity “Let Voters Decide.”

The “group” behind Proposition A should be called “Let Some Voters Decide That Other Voters Will Never Again Be Able to Decide to Tax Themselves in a Way Our Boss Doesn’t Believe In.”

Admittedly, that might be a little long. But it would be accurate.

What may well happen is that one man with staggering resources at his disposal will succeed in exploiting those resources—abetted by the nation’s antitax climate—to change municipal tax policy across Missouri to fit his supply-sider, purist free-market economic theories. Whether those theories are right or wrong is irrelevant. It is plainly wrong for cities’ right of self-determination to be nullified by people who don’t even live in those cities—and thus aren’t affected by their policies—thanks to a ballot initiative that charitably can be said to have generated little forethought among the voters.

Reasonable people can disagree about the merits of a city earnings tax as a means of raising revenue to run local government. On the positive side, it’s a defensible user tax, as it’s a way for nonresidents working within a city’s boundaries to pay for services received (such as fire and police protection). On the negative side, it can be a detriment to economic development, especially if neighboring communities have no such tax.

I’ve thought for a long time that the city should try to find an alternative to its earnings tax, and I certainly understand that many residents dislike it. But you don’t wipe out a third or more of a major municipal budget without first figuring out how the many millions of lost dollars will be replaced.

Only one thing is certain: It won’t be pain-free.

How ironic it is that many of the same people who clamor for lower taxation also want government brought closer to home. This ballot measure does the very opposite by reducing the freedom of local cities—large and small—with a statewide law that would be the essence of Big Brother governance.

This brings us back to Rex Sinquefield.

Sinquefield and his checkbook returned home six years ago, and he has since thrown himself into a variety of passions, including chess (he built a wonderful chess center in the Central West End), local culture (he sits on numerous civic boards), and the hobby of collecting politicians (like others do coins, stamps, or butterflies). He also established a conservative think tank, the Show-Me Institute.

They call him King Rex in the world of Missouri politics, without a sense of exaggeration or sarcasm.

By all accounts, Sinquefield has the best of intentions and a charitable heart. His good works should never be taken for granted, and he certainly has no obligation to do anything for the public good just because he’s wealthy.

But in a nation founded by men virtually unanimous in their distaste for nobility, the notion that vast wealth should translate into vast political influence doesn’t seem quite right. And to use that wealth to create a “grass-roots” public uprising over an issue the public never contemplated before is just bizarre.

Sinquefield is a chess-smart man who Certainly can’t be accused of lacking confidence in the superiority of his economic philosophy. He comes by that self-assuredness honestly, having made his fortune through theoretical reasoning.

Sinquefield and his University of Chicago economics contemporaries from the 1970s—known in economic circles as “the Chicago school”—came to the conclusion that making a detailed analysis of market behavior and asset classes would also be superior to trying to make qualitative judgments on individual stocks.

The validity of that theory is debated today in the financial world, and some investors who followed it for the past decade wish they hadn’t. Still, the company that Sinquefield co-founded and sold (Dimensional Fund Advisors) convinced many pension funds and other mega-investors of its wisdom during the boom years, and they turned billions over to the company to manage.

And Sinquefield became very wealthy in the process.

Sinquefield was so confident in his theories that statistical analysis trumped human judgment in the markets that he publicly referred to the likes of the great Warren Buffet as “outliers” who were basically just lucky guessers. As to the collective wisdom of investment advisors: “If all of these funds had been run by orangutans, we would get the same distribution of returns.”

That’s the mind-set Sinquefield brings to his retirement playground, the state of Missouri. He views it like he viewed the stock market, and those with contrary views to his conservative economic theories are outliers at best.

Sinquefield operates with a sense of entitlement. In a political system that is tragically dominated by the influence of the almighty dollar, he’s a fellow willing and able to spend far more of those dollars, so why shouldn’t he be able to have his economic ideas rule the day?

I understand that thinking. I just believe it’s wrong.

When spending limits were in place, Sinquefield set up 100 political action committees to get around them. Now that the limits are gone, he gives staggering donations—far more than nearly anyone else—to help him dominate the political landscape in St. Louis and throughout the state.

Sinquefield’s perfectly legal mega-donations undoubtedly compromise those on the receiving end. His activities cry out for campaign-finance reform.

But what’s happening with Proposition A is even worse. It’s a new idea to use vast personal wealth to hire people to get other people to sign petitions for some idea they never thought about—or even heard of—and then to ride the wave of simplistic popular sentiment to change public policy across the land.

And if this works, what’s next?

The ballot language might as well be shortened to two words: “Taxes Bad.”

All in favor say aye. Seeing no opposition, the measure passes.

In its campaign literature, Let Voters Decide published a “questionnaire” seeking voter opinions on Proposition A. Consider a couple of its loaded questions:

  • “Do you think imposing local earnings taxes on working people and small business owners has a positive or negative impact on a city’s local economy?”
  • “Missourians already pay state and federal income taxes. Do you think it is fair or unfair to require Missouri citizens to pay a third level of local income, or earnings, taxes?”

I’d like to ask a follow-up question to “Let Voters Decide”:

Does your questionnaire—which you must plan to use as evidence of voter support—indicate you think the average voter has the sophistication of a second-grader, or a first-grader?

To date, the largest political benefactor of Sinquefield’s generosity is apparently Mayor Francis Slay, who has received staggering donations (and whose cousin Laura Slay handles King Rex’s public relations).

While Kansas City Mayor Mark Funkhouser has spoken out loudly against Proposition A, and his city attorney has tried to stop the measure in court, Slay has remained silent as a church mouse about a measure that literally threatens his city with financial ruin.

What a coincidence.

Slay’s blog post at mayorslay.com was outrageous. He predicted the measure would “do well statewide, and much less well here and in KC.”

Yet even after acknowledging that Proposition A would not “do well” with his own constituents—the ones it would endanger—Slay couldn’t bring himself to even muster a suggestion that voters oppose his benefactor’s pet project. Not one word.

Great moments in civic leadership.

But not to worry, the mayor did offer a silver lining:

“Rex has assured me that he will not support a campaign in the City of St. Louis until the City and the region have found a viable alternative.”

That’s nice. After all, this is up to Rex.

But should it be?

SLM co-owner Ray Hartmann is a panelist on KETC Channel 9’s Donnybrook, which airs Thursdays at 7 p.m.

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