Tag Archives: Rex Sinquefield

Answering Greg Young on Rex Sinquefield

Greg Young, a MU student with some inconsequential links to Grass-Roots Organizing, comments on my piece on Rex Sinquefield in the Missouri Record:

My problem with this section is that Eapen presents the idea that Sinquefield and the Show-Me Institute protect the rich and powerful at the expense of the politically weak and powerless as a completely ridiculous idea.  It decidedly is not, and I don’t think I’m outside any mainstream orthodoxy when I say that.

This is misguided, and here is why. I am making the argument that it is not Sinquefield’s intention to protect the rich and powerful. I am not sure he even cares terribly much rich and powerful people remaining rich and powerful. But the what the evidence does indicate is that Sinquefield has been a powerful advocate for underprivileged children and education reform for years through his charitable work.

This interview with St. Louis Magazine contains a lot of the kind of biographical details that would allow for an informed evaluation of Sinquefield’s character, including his childhood in a Catholic Orphanage and the story of his life in academia and business. It is worth reading if you care about making an informed judgment about Sinquefield’s character and ability to be intellectually honest. Here’s an excerpt that I think is enlightening in terms of his policy advocacy in Missouri:

Obviously, the institute attracts like-minded scholars—Show-Me’s authors are vetted, often meeting with Sinquefield so he can decide if their heads are screwed on straight. But are the purchased study results biased in advance? They certainly weren’t in a recent study of the Missouri Plan, the state’s method of judge selection. Conservatives are eager to change Missouri’s system, but the study found it to have no economic disadvantages, compared to other nonelectoral systems. Sinquefield reportedly wasn’t thrilled by this conclusion; indeed, Show-Me promptly released a statement pointing out that there could be less tangible downfalls to the Missouri Plan. But Joseph Haslag, Kenneth Lay Chair in Economics at the University of Missouri–Columbia and an executive vice-president of Show-Me, says Sinquefield simply asked whether the methodology was sound. Assured that it was, he published the results.

So my response to Greg is that I think that a reasonable evaluation of Sinquefield and his advocacy leads to the conclusion that he honestly believes his policies are good for people and is willing to be honest about evidence based evaluations of those policies.

Greg continues:

For example, one of the Show-Me Institutes key ideas is their advocacy for a Fair Tax, which would eliminate the income tax in favor of a sales tax.  Now Fair Tax advocates will say that if implemented correctly, a sales tax can avoid being regressive and become equally fair to all citizens.  But it is hardly a controversial position to argue that a Fair Tax could end up harming lower income families while benefiting the rich and powerful.

The distinction I made answers this claim. Sinquefield believes this policy will be beneficial for the entirety of Missouri, not just the rich. Those who disagree that Fair Tax will stimulate job-creating economic growth can make their case, but their conclusion that the Fair Tax leaves Missouri low income Missourians worse off does not mean that Sinquefield thinks or intends that that will be the case. In fact, the evidence indicate that Sinquefield has already considered this possibility and has included in his proposal an explicit endorsement of an exemption for low income households from the Fair Tax. Here he is in the 2010 Show-Me Quarterly:

It’s true that a sales tax can be regressive, which is why it’s important to exempt low-income families from paying such increased taxes. If Missouri were to eliminate the income tax in favor of a slightly higher and more comprehensive sales tax, we could eliminate the penalty that the state’s tax policy imposes on business investment, and instead spur economic growth while simultaneously providing a more stable source of revenue for essential government functions.

It is a basic norm of civil discourse that you at least familiarize yourself with your opponent’s position on a subject before you implicate his character. It is this I find most offensive about the rhetoric of Grass Roots Organizing of Missouri: they’re lazy and willing to demonize someone before they are willing to research or understand his positions.

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My op-ed in the Missouri Record on Rex Sinquefield

…was published today and you can clickthrough here. Here is an excerpt:

A couple of months ago Grass-Roots Organizing (GRO) held an anti-big banks rally sponsored by a progressive local activist organization. I am generally in favor of breaking up big banks or adopting some kind of regulatory approach that limits the systemic risks that large, complex institutions created.

But a second message from GRO had a decidedly different tone. Along with the opposition to big financial institutions whose ignorance and malfeasance brought our economy to a very ugly place, there was also a diatribe against Rex Sinquefield, a multi-millionaire retired investment banker. Rex (and his wife Jeanne) have liberally funded politicians on both sides of the aisle to promote a policy agenda that includes increased school choice, more transparent and data-driven governance and reform of Missouri’s tax system. There are legitimate debates to be had on these policies but if you disagree with Rex Sinquefield on his political agenda or his methods, it is unfair to conflate these disagreements with opposition to big banks and financial deregulation.

There are two arguments for that thesis. The first, and obvious one, is that opposition to big banks is not premised on the same assumptions of opposition to the “Fair Tax Proposal” or school choice. The second and more important argument is that Sinquefield represents a school of thought that is diametrically opposite to the ideology that captured the financial services sector and brought the global economy to the brink of collapse. Moreover, the harshness of the criticism thrown his way is stunning; it is demonstrably true that Sinquefield’s political agenda around the state does not represent efforts to protect the rich and powerful at the expense of the politically weak and powerless.

I am assured by friends that the rest of the piece is worth reading, especially for those with an interest in Missouri politics. There is also a discussion of Sinquefield’s former company, Dimensional Funds Advisors, which is very interesting to me as an economics student.

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Rex Sinquefield on taxes

Patrick Tuohey at the Missouri Record has generously agreed to publish a piece I wrote on Rex Sinquefield and his political agenda in Missouri. The piece should come out tomorrow, but here is a selection of excerpts from the Show-Me Institute Quarterly clarifying Sinquefield’s advocacy on taxation. The excerpts are taken from the Fall 2008, Fall 2009, and the Winter 2010 issues of the Show-Me Quarterly.

On why a re-evaluation of Missouri tax policy is in order:

Missouri is chronically below average for economic development and growth. During the past 10 years, employment has grown 8.8 percent nationally, while Missouri has boosted jobs by a barely perceptible 0.23 percent. In their study for the American Legislative Exchange Council, titled “Rich States, Poor States,” Laffer and Moore offer one explanation for the state’s poor performance: Missouri’s personal income tax rates. The highest rate of 7 percent — which includes the state’s top marginal rate of 6 percent, plus a 1-percent earnings tax imposed in Kansas City and Saint Louis — places the Show-Me State at 32nd in the nation.

On the deficiencies of Missouri’s income tax:

We side with economists who say that an income tax is a huge drag on growth in two ways: First, an income tax lowers the net pay of workers, providing them with less of an incentive to work. The flip side of this argument is that Missouri workers are likely to demand higher pay in order to offset the higher after-tax income in other states. Second, the income tax is inherently unwise, because it’s relatively narrow in scope and cannot be avoided except by leaving the state. This is hardly the type of tax that makes sense in the face of cutthroat competition among states. Missouri needs business and job creation. We’re also impressed by another set of significant economic numbers. States with no income taxes have the lowest overall tax burdens, according to data compiled by the Tax Foundation. Indeed, the correlation is virtually one to one.

On the link between taxation, jobs, and economic growth:

We show that the state’s economic growth has been sluggish by national standards, but that the nine states without an income tax have added more than twice as many jobs as the national average. Not all of this extra growth can be attributed to differing tax systems, but some of it certainly stems from the fact that the lack of an income tax lowers business costs. States without an income tax also have lower overall rates of taxation; the eight states with the lowest taxation rates in the country are eight of the nine states with no income tax. Multiple studies have shown that lower levels of taxation also boost economic growth, so implementing a sales tax to replace the income tax could boost growth in more than one way.

A broad-based sales tax should exempt the poor and will provide Missouri with greater financial security:

It’s true that a sales tax can be regressive, which is why it’s important to exempt low-income families from paying such increased taxes. If Missouri were to eliminate the income tax in favor of a slightly higher and more comprehensive sales tax, we could eliminate the penalty that the state’s tax policy imposes on business investment, and instead spur economic growth while simultaneously providing a more stable source of revenue for essential government functions.

And replacing the income tax with a sales tax can be revenue-neutral:

n 2007, Missouri’s sales tax generated nearly $2 billion. To replace the income tax fully, the sales tax would have to produce another $4.9 billion, according to Joseph Haslag, executive vice president of the Show-Me Institute. (I would like to point out that because repeal of the income tax would stimulate growth, ultimately, a dollar-for-dollar increase in the sales tax won’t be necessary. But I’m willing to adopt a revenue-neutral approach for argument’s sake.) However, Missouri lawmakers over the years have voted to exempt more than 140 other items from the sales tax, according to research conducted for the Show-Me Institute. In addition, Missouri does not tax consumer services. If Missouri included in the sales tax all products and services purchased by individuals — which  would exclude business-to-business transactions and capital acquisitions by businesses — a general sales tax rate of about 5.7 percent would suffice, according to Haslag’s estimates.

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