Bloomberg News

Rex Leads Financial Oligarchs Attacking State Laws Across U.S.

March 22, 2012

Rex Sinquefield likes to write checks. In 2010, his $11.3 million bankrolled a successful ballot initiative banning new local income taxes in Missouri. It also required Kansas City and St. Louis voters to reaffirm their existing levies, which they later did.

That was a warm-up for Sinquefield’s much bigger target -- repealing Missouri (STOMO1)’s statewide income tax. The retired index- fund pioneer, in stocking feet and a pullover shirt, explains his free-market vision in the parlor of his century-old, limestone St. Louis mansion.

Income taxes “punish work,” stymie economic growth and are “a horrible way to raise money,” Sinquefield says. He helped devise the first Standard & Poor’s index funds in 1973 and co-founded Dimensional Fund Advisors in 1981. Repealing Missouri’s levy would spark a tax-slashing prairie fire across the Midwest, he says.

“Other states will follow,” Sinquefield says. “I know they will.”

In a fractured political universe that spawned the Tea Party, Occupy Wall Street and 10 percent congressional approval ratings, Sinquefield, 67, is up to his eyeballs in frustration. While he maintains he isn’t a billionaire and won’t divulge his net worth, he is using his wealth to go over the heads of the political establishment. He is a new American oligarch, appealing directly to voters for help in reshaping his home state to fit his economic beliefs.

‘Dominating the Landscape’

“He’s dominating the landscape because he’s got so much money,” said James Moody, who was budget director for former Republican Governor John Ashcroft and is part of a coalition opposing the repeal.

Others are following the same strategy. In California (STOCA1), George Joseph, chairman of the insurance company Mercury General Corp. (MCY), gave $8.2 million to put a proposal concerning auto insurance rates on California’s November ballot. His company spent $15.8 million in 2010 on a similar measure that voters rejected.

Howard Rich, a New York (STONY1) real estate investor, helped fund efforts in several states to limit government spending and authority. This year he is opposing what he calls a “scam initiative” on term limits in California. And George Soros, who has donated millions to back proposals that would liberalize marijuana laws, gave $500,000 in February to a California initiative aimed at revising sentencing standards.

Sinquefield is “really frustrated” with the Missouri General Assembly, he said, referring to unsuccessful attempts since 2008 to repeal the income tax. “It drives me nuts. That’s why we’ve been having to go to the ballot.”

$3 Billion Hole

The Sinquefield plan would kill Missouri’s 6 percent personal income tax and raise the sales tax to a maximum of 7 percent from today’s 4 percent. Since 1992, 140 proposals to cut or limit taxes have appeared on state ballots, and 61 percent passed, said Jennie Bowser, who tracks initiatives at the National Conference of State Legislatures in Denver.

The Missouri proposal would burden low- and middle-income wage earners while leaving a $3 billion budget hole, says Moody, the former budget director. It would also benefit rich people, he says. Moody describes Sinquefield and his tax plan this way: “There’s not a nice way to say it. They don’t know what they’re doing.”

Travis Brown, a Sinquefield ally and president of the ballot effort called Let Voters Decide, says the tax change is revenue-neutral and forecasts of budget shortages are the work of “a couple bureaucrats.” Sinquefield says the measure will remove the chief impediment to Missouri’s economy, which he says, citing government data, lagged behind all except Michigan and Ohio in the past decade.

Kansas, Oklahoma

In neighboring Kansas (STOKA1) and Oklahoma (STOOK1), lawmakers are advancing bills to repeal income taxes. Sinquefield says he contributed money to Kansans for No Income Tax. For the Missouri proposal, he has given $2.5 million so far to help get the measure on the ballot, he says.

To Amy Exelby, deputy executive director of the Washington- based Ballot Initiative Strategy Center, Sinquefield “is an extreme conservative who wants to reshape an entire state to fit his ideology.” The nonprofit, union-funded center supports what it calls progressive measures.

Sinquefield learned hard work in an orphanage and developed impatience with the established order at an early age, he says. He quit seminary after three years, joking that “I was studying to be a bishop, and then they told me I had to start at priest.” After he was drafted into the Army, he angled unsuccessfully for a hitch in Vietnam because he knew he’d be paid more and get out sooner.

‘Just Bored’

In 1981, he and David Booth created Dimensional Fund Advisors, which today manages $214 billion in assets. After two decades, the fun of investing other peoples’ money faded.

“I was just bored,” he said. “Frankly, I stayed the last year for the money.” That was 2005. The next year, Sinquefield started to spend, laying plans for a Cato Institute-like think tank in St. Louis called the Show-Me Institute, which promotes his free-market agenda.

Sinquefield is praised and damned in his hometown. He and his wife, Jeanne, created a charitable foundation that supports art, music and education. He serves on the boards of the St. Louis Symphony Orchestra and the Missouri Botanical Garden, among others. His life-long advocacy of chess won him induction Jan. 29 into the Missouri Sports Hall of Fame. He exchanges friendly e-mails with Tony La Russa, the former manager of Major League Baseball’s St. Louis Cardinals.

Public-School Gaffe

Opponents slam Sinquefield for promoting a “radical agenda” as well as for his support of school vouchers and abolishing teacher tenure. Sinquefield drew a torrent of protests after a presentation at Lindenwood University in suburban St. Louis Feb. 9, when he quoted a columnist saying the Ku Klux Klan devised the public school system to hurt African- American children. He apologized a day later, calling the remarks “ill-timed and inappropriate.”

“He says what he thinks,” said David Booth, Sinquefield’s business partner at Dimensional Fund Advisors. “Sometimes you can argue about whether he said it in the right way or not, but his heart’s in the right spot.”

The future of the Missouri tax proposal hinges on the actions of a state court in Jefferson City, the capital, which today is considering a suit challenging the ballot language on potential revenue loss. Sinquefield has made it clear that if the measure doesn’t qualify for the November ballot, there is always 2014.

“I don’t think Rex is going to go away,” Moody said.

To contact the reporters on this story: Tim Jones in Chicago at tjones58@bloomberg.net and Charles R. Babcock in Washington at cbabcock1@bloomberg.net

To contact the editors responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net; Gary Putka at gputka@bloomberg.net.


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