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Monday, March 1, 2010

Rex Sinquefield Aims to Kill Taxes in Missouri: Will He Take Preservation Down with Them?

In yesterday's Post-Dispatch article "Big changes proposed for taxes," Rex Sinquefield defended his proposal to eliminate the state income tax and replace it with an expanded sales tax. Proponents of this method call it the "Fair Tax," as everyone pays the same tax rate on the same goods.

The provision, SJR29, would do all of the following (from the Post-Dispatch):

— Repeal state's 6 percent individual income tax, 6.25 percent corporate income tax and franchise tax beginning Jan. 1, 2012.

— Replace lost revenue with a greatly expanded and higher sales tax.

— Tax items and services that are currently exempt, including groceries, prescription drugs, medical care and K-12 private schooling.

— Eliminate all tax credits, such as those for historic preservation and maternity homes.

— Exempt business-to-business transactions, used goods and college tuition.

— Give all households a "prebate" to cover higher sales taxes on spending up to the poverty level.

— Require two-thirds vote by Legislature to enact more tax exemptions

At this juncture, I am most interested in the fate of historic preservation, one of Missouri's top economic development tools via the state tax credit for historic rehabilitations. Ridding of income tax means rendering tax credits useless.

Sinquefield notes that he actually supports historic preservation efforts and believes the tax credits should be replaced with "direct subsidies". I would like to ask him, how would this work? The state of Missouri's legislators have already attempted multiple times to eliminate the historic preservation tax credit altogether without the assistance of the Fair Tax proposal. Indeed, they have already placed restrictions on it, capping tax credits for larger projects. If the Fair Tax takes out those tax credits that were alleged to only benefit wealthy, connected developers, largely in St. Louis, who will be the unlucky one to try to introduce "direct" historic preservation subsidies?

I worry they would disappear forever--and with them, a city like St. Louis's chances for seeing large swaths of its aging built environment renovated as we saw in the 2000s under the current tax credit program.

I worry about other aspects of this proposal as well, including the effects on higher sales taxes on small, local, independent businesses and the possibility of people crossing state lines to avoid such higher taxes on goods.

The measure is headed for floor debate, possibly as soon as this week. If approved, voters would decide the ultimate fate of the bill in November.


Matt Kastner said...

I really don't know what to make of this plan in general. I am anti-tax, but I just don't know that this plan is any better than the status quo. However, this could be a good thing in the long run. If a direct subsidy did indeed replace the credit, developers could possibly get more bang for their buck on their credits. Right now, most people sell their credits at 85 to 90% of their face value, for cash. If this step were removed it would either save developers money or the state. both of which would be good things. Of course, thats all a big "if."

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