SHARE:
Policy Points from Iowa Fiscal Partners

Iowa’s holiday from taxes — and reality

Posted August 3rd, 2012 to Blog
Mike Owen

Mike Owen

Oh, boy! It’s sales-tax holiday weekend in Iowa.

We’re talking about a “7 percent off” sale, folks — on only a limited list of items. When’s the last time that brought you into a store? At any other time of year, it would not draw customers, but guffaws. Seven percent? Really?

As IPP’s Andrew Cannon pointed out last year at this time, these gimmicks “drain revenue, and feed unfairness in a state tax system.” They are found, according to the Iowa Department of Revenue (DOR), in 17 states, and take various forms.

Of course the folks in the malls will say they’re great — anything to get someone in the door. But think about it. We’re literally talking about a few bucks off a pair of jeans, about $5 off a $70 pair of shoes. You could do a heck of a lot better on a regular sale at a store even when you’re paying sales tax.

And when you’re paying the tax, you’re not stiffing the school that your child will be attending in a few weeks in new jeans and shoes.

There is a price to public services any time we chip away at revenues. Whether the cost is around $3 million — as this gimmick appears to cost, according to a 2009 report from the DOR — or $40 million in some business tax credit program, it all adds up. Money not brought in due to exceptions in the tax code costs the bottom line every bit as much as money spent by a state agency.

Make no mistake, Iowans are being sold a bill of goods — but at least it’s tax-free!

Posted by Mike Owen, Assistant Director


House vote: Thumbs up or thumbs down for 86,000 Iowa families?

Posted August 1st, 2012 to Blog
Mike Owen

Mike Owen

Iowans would stand to lose much under a proposal this week in the U.S. House of Representatives. Citizens for Tax Justice offered a striking analysis last week highlighting the impact of the 2009 improvements in the refundable tax credits for low-income working families in Iowa.

Simply put, the House proposal would undo the good work of 2009 and increase tax inequities, while a Senate-passed bill would keep the good stuff.

One of the 2009 improvements is an expansion of the Earned Income Tax Credit (EITC), an issue we have covered extensively at IPP and the Iowa Fiscal Partnership.

Any attempts to weaken the EITC at either the state or federal level will harm low- to moderate-income working families in our state. More than 1 out of every 7 federal tax filers in Iowa claims the EITC (about 15 percent). But under H.R. 8, the tax proposal being offered by the House leadership, the EITC improvements from 2009 would be lost.

H.R. 8 also would fail to extend the improvements made in the Child Tax Credit (CTC) in 2009, and in the American Opportunity Tax Credit for higher education expenses.

It is impossible to find balance in the approach of H.R. 8, which would end these provisions above for 13 million working families with 26 million children, while extending tax cuts for 2.7 million high-income earners.

The state numbers from CTJ (full report available here):

  • 86,321 Iowa families with 190,553 kids would lose $62.5 million ($724 per family), if 2009 rules on EITC and the Per-Child Tax Credit are not extended;
  • 17,503 Iowa families with 28,179 kids would lose $32 million if the Per-Child Tax Credit earnings threshold does not remain at $3,000, compared to $13,300 as proposed by H.R. 8.
  • 59,159 Iowa families with 139,806 kids would lose $30.5 million if the two 2009 expansions of the EITC — larger credit for families with three or more children, and reducing the so-called “marriage penalty” — are not extended in 2013.

These “Making Work Pay” provisions of the tax code are almost exclusively of help to working families earning $50,000 or less at a time of stagnant wages and a difficult job market in which the Iowa economy is shifting toward lower-wage jobs.

To address our nation’s serious deficit and debt issues, a balanced approach should do nothing to increase poverty or income inequality. The Senate bill passed last week would keep the EITC and CTC improvements from 2009, and follows that principle. The bill that has emerged in the House does not.

Posted by Mike Owen, Assistant Director


The policy effects of Supreme Court ruling — beyond politics, legal arguments

Posted June 28th, 2012 to Blog

Andrew Cannon

While many are focusing on the political and judicial ramifications of today’s Supreme Court ruling affirming the constitutionality of the Affordable Care Act (ACA), it’s important to focus on how the law will affect health coverage.

ACA provisions at the heart of the Supreme Court decision are the personal responsibility requirement (or individual mandate) and the Medicaid expansion. Both provisions are not scheduled to take effect until January 1, 2014.

However, a number of provisions have been in effect since 2010 — shortly after the law’s passage, and have helped make insurance coverage accessible and more affordable for millions of Americans. Today’s ruling upholding the law means that millions of Americans will retain that coverage and those benefits.

Among the provisions currently in effect:

  • Young adult coverage — Uninsured persons age 18 through 25 may continue to be insured as a dependent on their parents’ health coverage. This provision has extended health care coverage to an estimated 6.6 million young Americans.[1]
  • Protections against pre-existing condition exclusions for children — The ACA prevents insurers from denying coverage to sick children. In Iowa, there are up to 51,000 children who have pre-existing conditions.[2]
  • The end of lifetime and annual benefit limits — Consumers with serious health conditions and treatment expenses no longer need to worry about bumping against maximum amounts an insurer will pay.
  • The elimination of the Medicare “doughnut hole” — Under existing Medicare law, seniors with high prescription costs had to pay for prescriptions entirely out-of-pocket. The ACA gradually eliminates this “doughnut hole,” providing seniors a 50 percent discounts on name-brand drugs and a 7 percent discount on generic drugs.
  • Tax credits for small businesses — Small businesses that meet specified qualifications may presently receive a tax credit if they offer their employees coverage and cover at least half of the premium cost.[3] Estimates of the number of eligible businesses vary, from about 2.6 million to about 4 million.[4] Take-up has been limited, partially due to lack of awareness.

Provisions that will take effect in 2014:

  • Expanding Medicaid coverage — Under the ACA, uninsured individuals with earnings at or below 133 percent of the federal poverty level ($30,657 for a family of four in 2012) will qualify for enrollment in Medicaid.  If Iowa fully participates in the Medicaid expansion, as many as 114,700 Iowans may receive coverage.[5]
  • Creation of new insurance marketplaces, or “exchanges” — The ACA instructs states to construct new insurance marketplaces, accessible by Internet, in which those who don’t receive insurance through their employer may shop for insurance coverage. Individuals who don’t qualify for Medicaid coverage will receive tax credits to help them cover the cost of their heath premium. This is the group affected by the individual mandate. According to estimates, as many as 250,000 Iowans could find their health coverage through the new insurance marketplace, or exchange.[6]

While legal scholars and political pundits will undoubtedly have much to say for months on today’s decision, the central purpose of the law should not be lost in the discussion: to expand health insurance coverage and help create a health system that works for everyone.

Posted by Andrew Cannon, Research Associate


[1] Sara R. Collins, Ruth Robertson, Tracy Garber and Michelle M. Doty, “Young, Uninsured, and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act is Helping,” the Commonwealth Fund. June 2012. <http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Jun/1604_collins_young_uninsured_in_debt_v4.pdf>.

[2] Christine Sebastian, Kim Bailey, and Kathleen Stoll, “Health Reform: A Closer Look. Help for Iowans with Pre-Existing

Conditions,” Families USA. May 2010. <http://www.familiesusa.org/assets/pdfs/health-reform/pre-existingconditions/iowa.pdf>.

[3] See “Right Balance for Small Business in Health Reform,” Iowa Fiscal Partnership, July 22, 2010. <http://www.iowafiscal.org/2010docs/100722-IFP-HCR-credits.pdf>.

[4] “Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity” (GAO-12-549), Government Accountability Office, May 2012. <http://gao.gov/assets/600/590832.pdf>.

[5] John Holahan and Irene Headen, “Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or Below 133% FPL,” Kaiser Commission on Medicaid and the Uninsured, May 2010. <http://www.kff.org/healthreform/upload/medicaid-coverage-and-spending-in-health-reform-national-and-state-by-state-results-for-adults-at-or-below-133-fpl.pdf>.

[6] Matthew Buettgens, John Hollahan, and Caitlin Carroll, “Health Reform Across States: Increased Insurance Coverage and Federal Spending on the Exchanges and Medicaid,” Urban Institute, March 2012. <http://www.urban.org/uploadedpdf/412310-Health-Reform-Across-the-States.pdf>.