Photography by BUCK

Written by Craig M. Kaminer

As the developer of some of the first index funds and the co-creator of a multibillion-dollar investment firm, Rex Sinquefield’s success in the business world was immense. After retiring in 2005 from his firm, Austin, Texas-based Dimensional Fund Advisors, Sinquefield returned to his hometown of St. Louis to tackle what he considers some of his most important work. In his roles as an activist and a philanthropist, he has brought a myriad of changes to St. Louis, much as his business career has changed the investment field.

He has donated time and money to many organizations, including the St. Louis Art Museum, the Contemporary Art Museum St. Louis, the Archdiocese of St. Louis’ Today and Tomorrow Educational Foundation and the St. Louis Symphony. One of his biggest projects – and biggest successes – is guiding the city to become the epicenter of the competitive chess world.

Thanks to Sinquefield, the Central West End is home to the Chess Club and Scholastic Center of St. Louis, which is perhaps the best chess center in the world, and the World Chess Hall of Fame. A who’s who of tournament players have moved to St. Louis because of Sinquefield’s passion for and investment in chess. The club’s membership has topped 1,000, and traffic to its website reached nearly 500,000 during the past year.

I caught up with Sinquefield recently at the World Chess Hall of Fame to talk about his philanthropy and why he has committed so much time and money to chess. I was interested in learning more about his interest in chess and how he (almost) singlehandedly has changed the course of chess history.

As a boy, he says, he was fascinated by chess. When Sinquefield was 13, his Uncle Fred taught him the game. “To his surprise, I beat him the second game we played, and from that point forward I was hooked,” Sinquefield says.

He played on the chess team at Bishop DuBourg High School and began playing in tournaments while in business school at the University of Chicago. “But I slowed down for many years because of family and kids, and came back to it when I had more time,” he says. “Now I have a chess lesson once a week from Jennifer Shahade, who is a two-time chess champion. I study and play online every day. Currently I’m playing 16 games at a time via computer. Sometimes I play speed chess, and other times I do ‘tactics.’”

He estimates he’s played thousands of games, but only 180 of them have been in tournaments.

“I love chess because it’s so beautiful,” he says. “It’s stimulating and so demanding. And the fact that it is one of four things that stave of dementia — chess, bridge, foreign language, and playing music – it’s good for me, too!”

His powers of concentration help him succeed, and not just in chess. “When I play, I don’t think about anything else,” he says. “Other players often do. I only focus on the game I am playing.” Chess is like life, he says, requiring good judgment, constant study and problem solving. And like life decisions, a chess player’s moves have consequences. “Tat’s why I think it is so important for schools to teach chess to children. I would like nothing more than to have chess taught in every school. “

With that in mind, the Chess Club and Scholastic Center employs more than 20 instructors who travel to more than 100 classrooms and community centers. “We even have a partnership with a judge in the juvenile courts who approached the Chess Club to teach at-risk kids the game of chess,” Sinquefield says. In addition, more than 70 children visit the Chess Club each Sunday to learn from grandmasters who teach at the club.

“I am most proud of the reception the club has received,” he said. “Our work is covered by media around the world, including being the cover story of more than one magazine. We’ve had visits from many famous players, including Anatoly Karpov, who was the world champion from 1975-‘85. Ironically, we wanted to show Karpov what we are doing for chess, but he came here in part because he always wanted to see the confluence of the Missouri and Mississippi rivers.”

Sinquefield Sinquefield is working to create a match featuring six of the top players in the world. “We want to invent a specific event associated exclusively with the club and St. Louis,” he says.

When I asked, “What do you want people to know about you?” he responded quickly. “I don’t think about my legacy,” he said, adding that he hoped the Chess Club, World Chess Hall of Fame and Show Me Institute, which proposes solutions to state and local policy issues, would continue to thrive.

“My message is that individuals can make a big difference,” he says, whether through charity or by starting a business. “People shouldn’t underestimate their power to do good.”

From: http://digital.slmag.net/i/123381

For nearly a year, this column has provided evidence that taxes matter and that income tax policy, in particular, directly impacts business decisions, employment, and ultimately the economy and the stability of workers’ lives. This week, for those who fervently refute this position, developments in France and the U.S. offer sound and practical proof in support of my ongoing thesis.

It all began in October last year, soon after France’s president Francois Hollande’s all-out assault on the French workers’ and business owners’ ability to acquire working wealth. His new administration’s revenue-generating approach of raising taxes on income, property, inheritance, and capital gains resulted in outrage from a large cadre of young (25-34 years old) entrepreneurs, dubbed Les Pigeons (French slang for one who is being duped), and prompted an organized social media campaign protesting business-stifling taxes.

The message was heard loud and clear: If you limit our ability to create businesses, invest in the development of new technologies, employ people, and make a profit, then we will leave. The outrage expressed by this youthful group of new-age industrialists and modern-day revolutionaries captured the attention of the socialist French regime and believe it or not… the old guard changed its course.

In a response that must be shaking socialism’s foundation across the world, President Hollande’s administration succumbed to the Les Pigeons’ squawking and cage-rattling by adjusting its policy trajectory and not raising capital gains taxes. The effort now seems hyper-focused on convincing employers that the administration does not see entrepreneurs as the enemy. Quite to the contrary, Hollande seems to be waging an all-out effort to keep entrepreneurs from taking flight. The confrontational, anti-business rhetoric that his administration led with in the last year now has turned into a gentle and welcoming coo.

In a story closer to home this week, Apple successfully avoided paying corporate income taxes in a move that it saw as critical to its future. In the midst of a stock buyback strategy, Apple found itself shorthanded on U.S.-held cash.  Facing corporate tax code regulations that restrict using off-shore cash to buy back stock, Apple had two possible options. The first was to transfer foreign held funds into the United States and face up to 35 percent in corporate income tax payments. The second option was much more attractive for obvious reasons: Issue $17 billion in corporate bonds and use the proceeds to finance the buyback. Without a doubt, the best move for Apple and its shareholders was issuing the bonds, and, in doing so, Apple created the largest investment-grade bond offering in history.

The moral of these two stories seems clear. The common thread here is that penalizing individuals who work every day in pursuit of a better life and clipping the wings of those who have vision, take a risk, and create new industries does little to inspire the entrepreneurial spirit and promote job growth. Income taxes do matter, and harmful tax policies cause flocks of industry leaders and fledgling small business owners to find a way to successfully maneuver to their best advantage. That could possibly mean leaving their income revenues on foreign soil, such as Apple is doing or taking flight altogether to move their base of operations to more attractive destinations, such as threatened by the angry birds of France.

From: http://www.forbes.com/sites/rexsinquefield/2013/05/03/high-taxes-upset-the-apple-cart-and-angry-birds-force-change/

By Rex Sinquefield, April 5, 2013

Those of you who have been following me know that about half of my columns deal with California’slackluster leadership and its resulting failed, irresponsible tax-and-spend policies. And, while I would prefer to shift my focus to other states and issues, this week’s Golden State-related headlines are — quite simply — impossible to avoid.

The leadership vacuum that exists in our country’s most populous state seems to have trickled down to local municipalities. Sadly, it is hard-working taxpayers and small business people who will pay the price for municipal ineptitude.

Tuesday, a U.S. Bankruptcy Court judge ruled that Stockton, California, may move forward with its Chapter 9 bankruptcy, which the city filed last summer.

Municipal fiscal crises seem to be spreading across the Golden State like wildfire. Stockton joins three other bankrupt California municipalities: Atwater, SanBernardino, and Mammoth Lakes.

The causes of Stockton’s crisis are being debated, but, without a doubt, two of the most significant contributors were recently identified by ReasonOnline, the free-market media outlet:

• unmanageable public employee pension debt
• out-of-control salary obligations

Stockton’s pension and other benefit commitments alone amount to more than $800 million – that’s huge for a city with a population of under 300,000. Without a doubt, it is the unbridled, irresponsible actions taken by its elected leaders that directly caused Stockton’s crisis.

What makes Tuesday’s ruling so worrisome is that bankruptcy court judge Klein’s decision will allow the city to rid itself of its debts without requiring it to fix the real problems that led to its insolvency. The message is loud and clear to cities across the state: “You too can avoid messy, politically difficult fiscal policy changes and attempts to reform unsustainable pension systems. Filing for protection under Chapter 9 of the federal bankruptcy code is your easy way out.”

It will take a titanium backbone, a strong political will, and a clear commitment to developing long-term economic development policies for leaders to undo the years of mismanagement of our cities and within their pension funds. In less than three years, there have been 33 municipal bankruptcy filings across the United States.

Though some cities’ have traveled unique paths on the way to fiscal hell, in many cases, the pension crisis that was predicted more than a decade ago is upon us, and taxpayers in each of those cities and states will pay for the fiscal mismanagement. At the very minimum, city governments should ensure that local leadership can manage 100% of their revenues, along with their liabilities.

A good example of this is the passage of Proposition A in St. Louis, Missouri. The successful effort returned control of the St. Louis Police Department from the state to the city of St. Louis. This move allows for greater efficiencies and accountability in the management of the department. It also saves the state and local taxpayers millions of dollars.

When looking to where the next municipal bankruptcies may occur, one key indicator lies with public pensions that exist in an unsustainable environment. Escalating and unmanageable public pensions cannot be fixed overnight. Payouts are guaranteed and therefore cannot be rescinded.

Only about half of the states have laws that govern municipal bankruptcies. Other financially distressed municipalities are taken over by state-appointed emergency managers. In Michigan, six local municipalities are under direct control of an emergency manager. In some cases, this would be the better path — but only if the new manager is dedicated to making the hard decisions and not afraid of the bare-knuckled political fight.

From http://www.forbes.com/sites/rexsinquefield/2013/04/05/stockton-ca-americas-most-miserable-city-just-got-a-lot-more-miserable/

by Rex Sinquefield, March 22, 2013

In 2011, New York Governor Andrew Cuomo promised a major overhaul in the state’s tax code. Along with that promise he set out to empanel a tax reform commission “to address long term changes to the tax system and create economic growth.”

Instead, Governor Cuomo seems more committed to tweaking New York’s antiquated and punitive tax structure and turning a blind eye to the devastating impact those policies are having on The Empire State. Unfortunately for the taxpayers of New York, the research shows that things do not look good, even if the millionaire’s tax would expire.

According to the new numbers below which were released by the Tax Foundation and published Tuesday in Crain’s New York Business:

· New York ranks No. 3 in state and local tax burden per capita behind Connecticut and New Jersey.

· New York ranks No. 1 in state and local tax burden as a percentage of state income.

· New York ranks No. 2 in Tax Freedom Day, which is the day the average New Yorker has earned enough to pay his or her taxes. The day is May 1. The median freedom day is April 14.

· New York ranks No. 1 in individual income tax collections per capita (fiscal year 2011) and No. 1 in state and local individual income tax collections per capita (even though only the city and Yonkers levy an income tax).

And this is not a recent development.

Historical data of taxpayer records made available by the United States Internal Revenue Service and publicly available at www.howmoneywalks.comoffer a long-term look at why upstate New York deserves real tax breaks rather than more excuses. The analysis (shown below) correlates the following IRS net losses in adjusted gross income (AGI) that occurred from 1995-2010:

· The entire state of New York lost $58.6 billion in AGI, enough to build 39 Yankee Stadiums. That’s an average of $3.9 billion a year, or $10.7 million a day, over 15 years.

· The New York Metropolitan Statistical Area, which encompasses 23 counties in three states, saw $66.1 billion leave—that’s more than twice the net worth of New York Mayor Michael Bloomberg.

· The five boroughs of New York saw a loss of $43.8 billion, about the market value of Time Warner, one of the city’s commercial anchors.

If Governor Andrew Cuomo still believes, as he did when he was elected, that the answer cannot be more and more taxes levied on New Yorkers, a good place to start backing his past rhetoric would be to reduce tax burdens for business owners. Until punitive taxes on workers and employers in New York City are lowered, or at least stabilized, it’s a safe bet that more investment firms will set up shop in North Carolina, more high wage earners will to turn to tax havens such as Puerto Rico, and Florida home values will continue to rebound. In fact, according to a recent survey by the New York Enterprise Report of 100,000 entrepreneurs, 85% are in favor of tax reform.

Albany politicians may be the only people left in New York who accept the idea of raising taxes.

The data is clear, many of those who do not accept New York’s tax and spend addiction as normal, may have erased the state from their March Madness tax brackets a long time ago.

by Rex Sinquefield, March 8, 2013

According to the U.S. Census’ American Community Survey, employers and high wage earners are not the only groups frustrated by California‘s wrong-minded tax policies. According to a Wall Street Journal article that recently referenced the survey, 95% of those individuals who have moved out of the Golden State earn less than $80,000 per year. The median annual income level of those who have left is around $40,000.

Without a doubt, this new revelation does not support the commonly held belief that California’s punitive tax policies are only impacting successful entrepreneurs and high-income workers.  In reality, the state imposes a minimum income tax rate of 9.3% on all workers earning more than $48,000 per year, an income level that is well below the state’s media income level of $60,000.

Combine this draconian individual tax policy with the state’s high cost of living, the fact that it has the highest unemployment rate in the country, out-of-reach housing prices, and to top it off, gas prices that are 50 to 60 cents higher than the rest of the country. Clearly, Sacramento‘s tax policies — which were developed to help disadvantaged individuals, lower-income families, and underemployed workers — are doing much more harm than good.

And workers are responding. They are fleeing California’s punishing tax regime in droves in favor of nearby states that seem to be rolling out a veritable red carpet.  Low tax states are accepting California’s outflow with open arms, and offering them a plethora of employment opportunities.Indeed, a number of western and southwestern states (such as Washington, Nevada, Arizona, and Texas) are actively pursuing employers of all shapes and sizes and workers of all kinds through more favorable tax structures.

Eager to employ California’s overtaxed refugees, an alarming number of large company relocations have been announced in the last few months. The list includes: Campbell’s Soup, Chevron, Comcast,eBay, LegalZoom, PayPal, Yelp and Maxwell Technologies.  These corporate moves to states with more favorable business climates are resulting in the loss of thousands of jobs and employment opportunities. The economic blow to California surely will have a detrimental impact on local communities and the taxpayers who stay behind for years to come.

In addition, according to a FoxNews.com report, California entrepreneurs who are guding growintg companies are increasingly looking to relocate. This group includes such innovators as Peter Farrell of ResMed, a medical-device maker that employs 600 workers. According to Farrell, “California is unfriendly. It’s become an unfriendly business environment.”

Referenced in the same report are several other stories of small businesses whose owners have decided to leave California for a more supportive business environment, such as a southern California manufacturer, Fallbrook Technologies, which recently announced that the company is moving to Texas, the land of no income tax. One Lake Tahoe-based accountant said he’s received more than 100 inquiries from Californians about the possible tax advantages of relocating to a state with lower taxes.

Ultimately, California residents may not be experiencing the same renewed confidence that is being felt by other Americans as the Dow reached record highs this week. Their frustration may be compounded by the fact that the enlightened leaders of pro-growth states are happy to entice their state’s best workers and employers with greater opportunities. And all of this begs the question: When will California’s leaders decide that the losses of economic and human capital are too great to withstand, and possibly to survive? Clearly, the people are not waiting for that moment of clarity.

by Rex Sinquefield, February 21, 2013

Lone Star State Governor Rick Perry seriously amped up his West Coast recruiting efforts this month in response to California’s passage of Proposition 30, a statewide vote that dramatically increased the state’s personal income tax rate. Taxpayers there will be paying up to 3% more on earned income, and that increase is retroactive to January 1, 2012. More than a thousand miles away from Sacramento, a far more positive outlook counters the frustration felt by many California employees and business owners.

Just last week Governor Perry met with 200 Golden State business owners, and two weeks ago he purchased $24,000 in radio ads intended to lure entrepreneurs with lower individual taxes and a business-friendly climate. The 30-second spots tout Texas’ “zero income tax, low overall tax burden, sensible regulations and fair tax system.” The targeted campaign and face-to-face marketing efforts appear to be paying off… in spades.

Even California’s Democratic Lt. Governor, Gavin Newsom, has serious concerns about the economic impact of his state’s tax policies. According to John Fund of National Review, Newsom declared after visiting with former California-based companies that now call Texas their home, “I am impressed with the focus on job creation I’ve seen here. We need to have a more balanced business climate in California.” This sign of further working wealth migration from California into Texas brings a more fiscally relevant meaning to George Strait’s country classic, “All My Exes Live in Texas.”

Dimensional Fund Advisors (DFA), the investment firm that I co-founded with David Booth 31 years ago, now can be counted as one of the many companies that has moved its headquarters from California. DFA employees now enjoy a big increase in take-home pay and are generously contributing their hard-earned dollars to Austin’s local economy. Similar stories are being told in numerous pro-growth states around the country.

Five states are aggressively pursuing their own pro-growth tax policies to attract employers and compete with the nine no-income tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). Three of those states are considering replacing their state personal and corporate income taxes (Louisiana, Nebraska, and North Carolina) and two states are working on a gradual phase-out (Kansas and Oklahoma).

From my farm in Osage County, Missouri, the kind of competitive advantages being realized in Texas are closer than one might think. Kansas’ effort to increase revenues by creating a vibrant business environment should have taxpayers in Missouri as nervous as a cat in a room full of rocking chairs.

And several Missouri state legislators are responding to Kansas Governor Brownback’s tax reform initiatives by pushing for “broad-based tax relief” as a counter-measure. No doubt, it is clear to these elected officials that Texas’ meteoric rise in California relocation inquiries is merely a prologue to what we can expect in our own state-border battle for jobs.

by Rex Sinquefield, February 8, 2013

In the wake of the U.S. economy realizing its most significant decline since 2009 (an annualized decline of 0.1 percent during the 4th quarter of 2012), this week President Obama laid out his plan to kick the “sequester can” even further down the road. His renewed call for tax increases, along with limited spending cuts, is a prime example of what President Ronald Reagan was referring to when he claimed, “Some people have labored so long at making government bigger that they’ve developed a knee-jerk addiction to tax increases. Every time their knee jerks, we get kicked.”

The federal government’s seemingly insatiable appetite for out-of-control spending affects far more than jut the wealthy. In fact, Washington’s tax-and-spend tendencies will impact more than three-quarters of American households this year. Many American workers were caught off-guard in January, when they saw their annual take-home pay shrink by hundreds of dollars due to a broad-based increase in payroll taxes.

In 2013, the employee tax rate for Social Securityincreased to 6.2% (an increase of 2 percentage points), and the Social Security wage base limit increased to $113,700 from $110,100. Now, a single person earning $38,000 a year will pay $760 more this year. Workers earning $90,000 will pay nearly $1,800 more than last year. Those with incomes of $185,000 will pay $2,274 more in 2013.

In addition to the “fiscal cliff” deal that the President signed into law last month which raised taxes on high wage earners, couples who make more than $250,000 will face a new 3.8 percent tax on their investment income passed as part of ObamaCare in 2010. In effect investment income taxes will rise from 15% to 23.8% for those making over $400,000. But wait, there’s more! High wage earners, those who make $400,000 plus, will also see their income taxes rise from 35% to 39.6%. Add in state and local income taxes and many families will find themselves paying over 50%.

Our federal government’s “knee-jerk” dependence on tapping into workers’ earnings at nearly every income level is causing several states to kick back in very Reagan-esque ways.

Discussing her tax-cut proposal, OklahomaGovernor Mary Fallin said the reduction in personal income tax will help offset the loss residents saw with the rise in the federal payroll tax. Oklahoma’s House of Representatives will be considering a bill that will reduce the income tax rate by .25 percent, to 5 percent.

Louisiana Governor Bobby Jindal is proposing that his state phase out both personal and corporate state income taxes. Such a move would make Louisiana more competitive with its neighbor to the west –Texas, a no-income-tax state which attracts thousands of residents and millions of dollars each year.

Feeling the competitive advantages of pro-growth and tax reform policies being initiated by neighboring states Michigan, Ohio, and Wisconsin, Indiana Governor Mike Pence is proposing that his state’s FY 2014-15 budget include measures for cutting income taxes for every worker by 10 percent and keeping state spending below the rate of inflation.

In my own home state of Missouri, legislators are proposing a reduction in personal income taxes in response to our neighboring state of Kansas’ newpro-growth tax policies, in an all-out effort to keep workers and businesses from simply walking across the state line.

Without a doubt, there is a grand experiment in economic policy taking shape across the country that could lead to a significant increase in the number of low to no-income tax states. At the center of it all is a fierce competition for today’s workers and employers. The battle is not for those who lack the courage of their convictions. The policy that determines the winners and losers will define state economic policies of tomorrow and ultimately could have a dramatic effect on national policy. Congress and the President would do well to look outside the Beltway at the tax revolutions taking place in the states.

Our nation’s future prosperity will result from the economic stability of American workers – not from damaging, ineffective tax-and-spend policies.

by Rex Sinquefield, January 24, 2013

Fans of the Seattle SuperSonics, the beloved NBA team whisked away to Oklahoma City in 2008, will soon have reason to stand up and cheer. No, the Oklahoma City Thunder isn’t headed back to the Pacific Northwest – but the Sacramento Kings will be calling Seattle home before too long. The resurrection of the SuperSonics has spirits soaring in the Evergreen State.

On Monday morning, the Seattle Times reported that a Seattle group helmed by hedge-fund manager Chris Hansen and Microsoft CEO Steve Ballmer agreed to purchase the Sacramento Kings. Pending approval from the NBA Board of Governors, the team would move to Seattle and play its first season as the SuperSonics this fall.

There are many reasons for teams to relocate, and the built-in Seattle fan base is certainly a plus for this NBA team. However, it is crucial to remember that sports franchises are multi-million dollar businesses. Those who occupy the front office spend a lot of time scrutinizing the finances. From this perspective, a move from California to Washington State is a no-brainer. The marginal personal-income tax rate for wealthy Californians – a category under which professional ballplayers almost certainly fall – is a whopping 13.3 percent. Washington, on the other hand, levies no personal income tax on any of its residents. Whether a member of the SuperSonics organization is shooting free-throws or taking tickets, he gets to keep more of his earned income.

Professional sports teams aren’t the only organizations ditching California for Washington’s friendlier tax climate. According to migration data from the Internal Revenue Service, over the 15-year period from 1995 to 2010, King County (where Seattle is located) has gained $32 million in adjusted gross income from Sacramento County. Other California counties have added significant amounts to King County’s coffers, too. During those same 15 years, Orange County lost $98 million in net AGI to King County. Los Angeles saw a huge hit, with King County gaining $313 million of Los Angelenos’ net AGI.

Clearly, investors like Chris Hansen and Steve Ballmer understand that personal income is one of our most precious and most highly mobile assets. For the Kings, the move to Seattle is one for the win column. For Sacramento, it’s yet another loss, provoked by a growth-stifling tax climate. Seattleites are no doubt looking forward to cheering for the SuperSonics this fall.

Thanks to the state’s lack of a personal income tax, these fans may even have enough spending money for a courtside seat.