Multi-millionaire’s “Mega Tax” is mega bad news

Multi-millionaire Rex Sinquefield is at it again, with four new mega tax proposals aimed at eliminating Missouri’s personal income tax. Sinquefield’s effort to single-handedly change state law parallels similar efforts in other states by members of the “millionaires’ ballot-initiative club.”

Sinquefields’ initiatives would shift money around by replacing income taxes with higher taxes elsewhere and by actually adding sales tax to currently exempt goods and services. The Missouri Budget Project (MBP) has done the math, and it doesn’t come out well for the vast majority of people.

The short and sweet of the mega tax plans are: Eliminate state income taxes entirely, raise current state sales tax, begin taxing other goods and services that are currently exempt from state sales tax (like groceries), and still end up with massive revenue shortfalls.

Unfortunately, revenue isn’t the only thing being shifted around. If you currently spend most or all of your income on rent, utilities, loans, groceries, and other living expenses, the mega tax has more bad news for you. Rex and his mega tax initiatives don’t think you pay enough taxes on those essential services, so up they go. Thus, a big tax shift the likes of which Rex proposes means the burden on low-income and middle class families who spend the bulk of their income would be disproportionately higher.

The initiatives graciously cap the state sales tax on groceries at 5.5%. That is still 5.5% more than they are currently taxed. Plus there are a litany of other goods and services that are exempt from a maximum sales tax, so who knows how high a sales tax on these items could reach before we meet budgetary needs—or are forced to make drastic budget cuts.  MBP lists a few of the exemptions:

  • Prescription drugs
  • Healthcare services
  • Childcare services
  • Rent, sales, and leases of property
  • Assisted living and/or residential care
  • School tuition and fees (elementary, secondary, vocational, technical, and college/university)
  • Gaming sales, winnings, admission fees
  • Construction, computer and software design, employment services
  • Professional services from lawyers; accountants; barbers/stylists; architects; cosmetologists; engineers; embalmers; funeral directors; real estate agents, brokers and appraisers.

Those are just a few of the highlights. Having seen the list, it seems like imposing high sales tax on consumers would be bad for business in Missouri (perhaps good for business in bordering states). If the cost of products and services is much higher, people will most definitely spend less, especially in a recession. Less consumer spending means less production, fewer jobs, and even less consumer spending. Like the federal government, we would be trapped in a vicious cycle of spending cuts and job loss, recession and mind-numbing loss.

Because the word “tax” is such a dirty word, despite all the benefits we reap (safe bridges and roads anyone?), it may seem unlikely that  sales tax would get too high before Missourians take a stand. I certainly can’t see “small government” tea party politicians approving of exorbitant sales tax. That would be hypocritical, right? No, they’d look to budget cuts. “Starving the beast”, as they say. Revenue shortfalls brought on by an elimination of income tax are most likely to result in huge cuts to the usual big budget fall guys: education, social services, public safety, healthcare, and senior services.

Rex wants to put the mega tax on the 2012 Missouri ballot.  So, be sure to vote. Better yet, let your congressmen know how you feel about these proposals before they get to the ballot. Don’t forget: the mega tax would mean a constitutional amendment. That’s the legislative equivalent of writing something in stone. Have you thanked Rex Sinquefield today?