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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Seriously? Did you forget that the police department takes all the money from the drug busts, sale of drug deal related property that is supposed to go to the schools....and then charge them to run the DARE program? I'm thinking if we lose the cops we have now, no great loss. I know of several cops living in Maple Park Estates, Briarcliff and Claymont....how do you suppose they afford that?
Seriously? Did you forget that the police department takes all the money from the drug busts, sale of drug deal related property that is supposed to go to the schools....and then charge them to run the DARE program? I'm thinking if we lose the cops we have now, no great loss. I know of several cops living in Maple Park Estates, Briarcliff and Claymont....how do you suppose they afford that?
The point in phasing out the e-tax is to help bring jobs back to KC. KC has had 0 population growth over the past 50 years despite being half suburban and mostly served by good schools (14 school districts serve the city). Also, KC has had a net loss of jobs the past 20 years and has been getting outpaced by JoCo about 4 jobs for every 1 the past 4 decades. KCMO has empty office space all over the place and still can't fill it despite cheaper lease rates. Why?
Downtown, for example, is probably almost half public sector jobs. A lot of the private sector has moved to JoCo. Your Leawood CEO that people think they're smart for taxing him an extra 1%. He took his jobs back across the state line and saved 1% doing it and also pays less in property taxes. That's eroded the tax base over time.
I'm not saying completely eliminating the e-tax is the way to go, but KC needs to realize that the city has to grow and the e-tax doesn't help the city grow. This metro has grown something like 400,000 people over the past 30 years or so and KC didn't get any of that net growth and the city has lost its status as the job center for the private sector. That's not good. So either the State of Missouri needs to do something or KC needs to do something, but the status quo has been ineffective. Even dumping $5 billion downtown couldn't bring any JoCo employers back across the line.
The point in phasing out the e-tax is to help bring jobs back to KC. KC has had 0 population growth over the past 50 years despite being half suburban and mostly served by good schools (14 school districts serve the city). Also, KC has had a net loss of jobs the past 20 years and has been getting outpaced by JoCo about 4 jobs for every 1 the past 4 decades. KCMO has empty office space all over the place and still can't fill it despite cheaper lease rates. Why? Downtown, for example, is probably almost half public sector jobs. A lot of the private sector has moved to JoCo. Your Leawood CEO that people think they're smart for taxing him an extra 1%. He took his jobs back across the state line and saved 1% doing it and also pays less in property taxes. That's eroded the tax base over time. I'm not saying completely eliminating the e-tax is the way to go, but KC needs to realize that the city has to grow and the e-tax doesn't help the city grow. This metro has grown something like 400,000 people over the past 30 years or so and KC didn't get any of that net growth and the city has lost its status as the job center for the private sector. That's not good. So either the State of Missouri needs to do something or KC needs to do something, but the status quo has been ineffective. Even dumping $5 billion downtown couldn't bring any JoCo employers back across the line.
Henry George may have been less of a crank than you believe. William Vickrey, the winner of the 1996 Nobel Memorial Prize in Economics, wrote fairly extensively on the subject, and believed "removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction." (Vickrey, William. "The Corporate Income Tax in the U.S. Tax System, 73 TAX NOTES 597, 603(1996))
Henry George may have been less of a crank than you believe. William Vickrey, the winner of the 1996 Nobel Memorial Prize in Economics, wrote fairly extensively on the subject, and believed "removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction." (Vickrey, William. "The Corporate Income Tax in the U.S. Tax System, 73 TAX NOTES 597, 603(1996))
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