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Posts tagged Budget and Tax

Sales-tax break didn’t add jobs

Posted June 6th, 2017 to Blog

Pushes for lower taxes on business routinely come with promises for more jobs. On that score, the more-costly-than-expected manufacturing sales-tax break has not produced for Iowans.

Since the start of the current fiscal year, when the new law took effect, Iowa manufacturing jobs are even lower than where they started. Clearly the new break did not cause the drop — a decline in manufacturing jobs started over two years ago after some recovery from the 2007-09 Great Recession. Iowa lost more than 30,000 manufacturing jobs from the peak in those years and never fully recovered. Manufacturing jobs dipped below 211,000 in April for the third time in six months, to nearly their lowest level in five years.

Thus, whatever can be said about the expensive new sales-tax break for business, creating jobs in manufacturing is not one of them.

It does appear the break is more costly than had been expected. An April memo from the Legislative Services Agency (LSA) has received significant attention in recent days, as sales-tax revenues are on pace to be down about $100 million from what was expected for the fiscal year ending June 30. The cost of the sales-tax break for an expanded list of items used in manufacturing had been projected at $21.3 million for the state.

The LSA analysis suggests that at least part of the unexpected revenue loss might be due to underestimated costs of that special sales-tax break.

It is true that the manufacturing sales-tax break was promoted on larger grounds than just job growth. In a break from its usual promotion of a hodgepodge of inequitable breaks creating a severely unbalanced playing field, the business lobby had promoted this as a fairness issue for businesses. That political strategy worked.

But increasing jobs was the steady drumbeat from Governor Branstad for his economic policies throughout the six years of his return to office in 2011, so it is reasonable to look for any job impacts.

In this case, none are immediately apparent. What we can see is that without the change, and with more careful budget projections, new Governor Kim Reynolds quite likely would not be facing the added revenue challenges she has before her.

owen-2013-57Posted by IPP Executive Director Mike Owen

mikeowen@iowapolicyproject.org


Health care ‘reform’ gets worse

Posted April 27th, 2017 to Blog

The House Republican plan to replace Obamacare (the Affordable Care Act) with the American Health Care Act (AHCA), which a few weeks ago failed to even come to a vote, has been reincarnated. The new version of the AHCA has apparently won the support of the Freedom Caucus in the House, but in so doing has become significantly worse for millions of Americans.

Here are the key points about this new attempt to “repeal and replace” Obamacare:

  • Despite repeated promises to keep the most popular part of Obamacare, the provision prohibiting insurance companies from refusing to cover those with pre-existing conditions, the new version returns us to the bad old days. While a particular state may choose to keep the prohibition, there is no longer any nationwide requirement that insurance companies issue affordable policies regardless of pre-existing conditions.
  • Nationwide standards for health insurance policies will be rolled back; plans will no longer be required to cover services such as mental health, maternity care, or substance abuse treatment.
  • The nationwide prohibition on lifetime and annual limits on benefits will be gone, meaning the possibility of medical bankruptcy will loom once again for many.
  • The modified version of the bill still effectively ends the Medicaid expansion; about 150,000 Iowans now covered under that provision could lose insurance altogether.
  • The bill still cuts $840 billion from Medicaid over 10 years, most of the savings going to wealthy individuals, drug companies, insurance companies, and other corporations.
  • Premiums and deductibles will still rise for large numbers of persons buying insurance on the exchanges, especially for the elderly, those with lower incomes, and those in high-cost states or areas, such as most of rural Iowa.
  • Under the bill, there would be no limit on the premium an insurance company can charge based on medical history; thus someone with pre-existing conditions could in theory be offered coverage, but at a cost that is simply unaffordable. There is little difference between this situation and straight denial of coverage. A state could choose to prohibit this practice (i.e., to keep the Obamacare provision in place), but few states chose to do so before Obamacare.

While the proponents of this revised plan may argue that it keeps the prohibition on gender discrimination, a woman would pay substantially more for a plan that included maternity coverage. Such coverage would not be a required part of all plans, but instead would be an expensive option.

Just how this revised bill would affect overall coverage rates, premiums, and out-of-pocket costs, awaits a new analysis by the Congressional Budget Office. But it is quite possible that the bill will be voted on in the house without the benefit of that analysis. Part of the pressure to pass the bill now comes from the desire on the part of the Trump administration to come up with large savings to the federal government that can then be used to finance cuts to corporate and individual income taxes.

The bottom line: worse health care coverage at higher cost to millions, loss of coverage entirely to millions more, in order to finance tax cuts for corporations (and probably millionaires as well).

Posted by Peter Fisher, research director of the nonpartisan Iowa Policy Project. pfisher@iowapolicyproject.org

Also see Fisher’s March 2017 policy brief for the Iowa Fiscal Partnership: “Replacing ACA: What you need to know about the AHCA.”


Session Recap: ‘Historic’ — not label of pride

Posted April 25th, 2017 to Blog

By

4/22/17

IFP Statement: ‘Historic’ session not a label of pride

Legislative session hits working families and traditions of good governance

Basic RGB

Statement of Iowa Fiscal Partnership • Mike Owen, Iowa Policy Project

To describe the 2017 Iowa legislative session as “historic” is not a label its leaders should wear with pride.

Iowans needed a legislative session that worked to raise family incomes and expand educational opportunity. Iowans had long demanded water-quality improvement measures. Many called for lawmakers to address the lack of fairness, adequacy and accountability in a tax system laden with special-interest breaks and costly subsidies to corporations.

Instead, Iowans got a continued ratcheting down of funding for PK-12 public education. There were significant and serious cuts in post-secondary education that will lead to tuition increases. We saw cuts to early-childhood education and other programs that serve our most at-risk children and neglect of the child-care assistance program that helps working families struggling to get by.

The Legislature continues to demand little or nothing of industrial agriculture in cleaning up the mess it has left in our waters. Lawmakers tried to dismantle the Des Moines Water Works board, limited neighbors’ right to complain in court about pollution, and eliminated scientific research at the Leopold Center. Their ultimate action on water merely diverts resources from other priorities, such as education and public safety.

Lawmakers largely left the tax issue to the next session. An overture in the House to reform Iowa’s reckless system of tax credits was a welcome acknowledgment that this issue needs attention, but devils in the details make further discussion of this issue during the interim even more welcome.

Perhaps as troubling as the destructive nature of policy content this session, Iowa’s image of adherence to good governance took a big hit. The most controversial policy changes came not through collaborative, public discussion in committee, let alone the 2016 political campaigns, but were often dumped into lawmakers’ laps with little opportunity for amendments.

In what could accurately be called a “session of suppression,” lawmakers achieved:

  • Wage suppression, with a bill to preempt local minimum wage increases while refusing to raise Iowa’s repressive, 9-year-old minimum of $7.25.
  • Workplace suppression, gutting collective bargaining protections for public employees, and making it more difficult for Iowans recover financially from injuries on the job.
  • Health-care suppression, achieved in workers’ compensation legislation while also refusing to reverse Governor Branstad’s disastrous move to privatize Medicaid.
  • Local suppression, whacking at local government control in a variety of areas: minimum wage, legal defenses against concentrated animal feeding operations (CAFOs), fireworks sales, and collective bargaining options.
  • Voter suppression, with a bill to make it more difficult for many citizens, particularly low-income and senior voters, to exercise their right to vote.
  • Suppression of children’s healthy development, with additional cuts to Early Childhood Iowa and Shared Visions that will reduce access to critical home visitation, child care and preschool services for some of our most at-risk youngsters.

Some legislators may boast of a “historic” session. History will mark 2017 as a low point in Iowans’ respect and care for each other, a legacy that will not be celebrated when future Iowans look back on this session and the closing act of Governor Branstad’s long tenure in office.

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The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit, Iowa-based organizations — the Iowa Policy Project in Iowa City, and the Child & Family Policy Center in Des Moines. Reports are available at www.iowafiscal.org, and on the websites of the two partner organizations, www.iowapolicyproject.org and www.cfpciowa.org.


Lost legacy of science and research?

Posted April 19th, 2017 to Blog

Editor’s Note: The Cedar Rapids Gazette published a version of this piece online Tuesday, April 18, 2017.

While Iowans and others celebrate Earth Day on Saturday with a March for Science, many legislators have already tripped over their own votes.

Besides several cuts to higher education Iowa legislators have taken aim at particular scientific centers at the University of Iowa and Iowa State University.

With the state’s second largest city and its largest university both almost recovered from massive flooding, they attacked the Flood Center at the UI, which may survive with a 20 percent cut to reward how its data and research have helped citizens of the state.

Certainly as troubling is the pending elimination of the Leopold Center for Sustainable Agriculture at ISU, and the farming out of duties at the Energy Center at ISU to the Iowa Economic Development Authority. So much for independent research.

One thing lost in these assaults is a sense of institutional memory. Those of us who started the Leopold Center some 30 years ago found agreement to assure Iowans a lasting resource independent of industry control and other research funding. And it has worked.

Much of the research on how to reduce agricultural damage to water quality has been started by the Leopold Center — more than 600 research projects, according to Leopold’s director, Professor Mark Rasmussen.

You drink the water. You breathe the air. Are you comfortable that Iowa’s premier research universities are being blocked from conducting research on topics including water quality, manure management, livestock grazing, cover crops, alternative conservation practices, biomass production, soil health and local food systems development?

In fact, as Rasmussen notes, many practices recommended in Iowa’s Nutrient Reduction Strategy to reduce agricultural pollution — including streamside buffers, erosion control measures, and bioreactors — “were first researched through Leopold Center funding.”

Now, the history of the Leopold Center is being reinvented by lawmakers attempting to erase a three-decade, bipartisan commitment to sustainable funding of independent research. They would eliminate the publicly directed mission and turn it over to businesses.

It is hard to know if these attacks are driven by politics or corporate interest. Maybe it is just Iowa’s version of an attack on science generally.

Either way, the bill eliminating the Leopold Center has passed the Senate and Iowans have only a short time to demand more from their elected officials in the House and the Governor. Voices rising helped to save the Flood Center with only a cut. Concerned Iowans may yet save the Leopold Center, but the clock is ticking.

 

David Osterberg, a state representative from Mount Vernon from 1983-1994, is co-founder and lead environmental researcher at the nonpartisan Iowa Policy Project. Osterberg and fellow legislators Ralph Rosenberg and Paul Johnson were co-authors of the law that created the Leopold Center at Iowa State University.


Today’s virtual House graphic: Risky fix to non-problem

Posted March 27th, 2017 to Blog

Under the radar at the Iowa Statehouse, a significant and dangerous change is being promoted through a proposed constitutional amendment to cap spending in a state where spending is below the U.S. average.

The amendment — approved by the Senate and soon to be considered in the House — is a gimmick rather than real reform. In fact, because the amendment would require two-thirds approval of both legislative changes to prohibit spending more than an arbitrary limit, it would impede elected representatives from making the kinds of public investments in Iowa’s children, the state’s infrastructure, and our environment that the people of Iowa say they want. To learn more about this issue, click here for Peter Fisher’s brief report for the Iowa Fiscal Partnership.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session the Iowa Policy Project is offering examples. In today’s graphic, we illustrate the realities of state spending in Iowa, often inflated in political rhetoric.


Curtains for tax reform

Posted March 27th, 2017 to Blog

If there’s anything we need less of this legislative session, it is back-room dealing where major changes in public policy are hatched, then rammed through the Legislature without sufficient public vetting.

Senate Majority Leader Bill Dix is quoted in media that a tax plan is coming in the next two weeks. It’s staying under wraps until then — a terrible disservice to the responsible setting of public policy. Senator Dix should pull back the curtains, right now.

But, since the senator is not going to let the rest of us in on his big secret tax plan, we should all go into this recognizing at least two major points at the start:

(1) Iowa taxes are in the middle of the pack or below average by any responsible measure, something the business lobby and far-right ideologues never want to acknowledge; and

(2) any discussion of tax changes should take a comprehensive approach that should be grounded in widely accepted principles of taxation.

Point 2 is something that is always a problem in Iowa. The typical approach is to target one tax, cut it, and move on to the next one. Meanwhile, the impact on the overall adequacy and fairness of the tax structure (two of the important tax principles), and on the critical public service that the tax system supports, is left to a “let the chips fall” mentality.

Take the curtains away, Senator Dix. It’s the business of all Iowans, right now. A late-session rush job to make a major overhaul of Iowa taxes is not only wrong from a civics-textbook standpoint, but it is bound to create problems that its authors cannot predict.

Posted by Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

Repeal of Obamacare: Following the money

Posted March 21st, 2017 to Blog

Congressional Republicans have proposed replacing the Affordable Care Act, known as Obamacare, with the American Health Care Act, or AHCA. To understand why, suppose we follow the money — who loses, who gains?

On the losing side are thousands of Iowans who would find themselves facing higher costs for health insurance. Consider a married couple with two young children, and with $40,000 annual income. In Iowa’s metropolitan counties, this family’s tax credits for the purchase of health insurance would fall by $3,469 annually. In rural areas, where health insurance is much more expensive, the same family would face nearly an $8,000 reduction in credits — in other words, an $8,000 increase in the cost of health insurance. For couples in their late 50s or early 60s, the jump in costs is much higher: $11,300 in urban areas, over $17,000 in rural counties. (See an earlier IPP report for details.)

The much greater impact on rural Iowans is because the Republican plan gives everyone the same credit, whether they are in a high-cost or low-cost county. While the credit rises with age,  the credits for older Iowans cover a far smaller share of their much higher insurance costs. Overall, the average Iowa family currently receiving subsidies for the purchase of insurance would see a $2,512 drop in the subsidy.[1]

But who are the winners? The Republican plan includes tax cuts primarily for the wealthiest Americans, as well as drug and insurance companies. The 400 highest-income taxpayers nationally would get annual tax cuts averaging about $7 million each. These taxpayers, whose annual incomes average more than $300 million, would receive tax cuts totaling about $2.8 billion a year.[2]

We now know how two of these cuts, amounting to $31 billion a year, would impact Iowans. The Affordable Care Act was financed in part by these two new taxes. One is the Net Investment Income Tax, the other the Additional Medicare Tax. Both fall primarily on the wealthiest. Repeal of these two ACA taxes would shower $116.7 million in tax cuts each year on just 1.9 percent of Iowa taxpayers. A full 92 percent of those tax cuts would go to the richest 1 percent of Iowa taxpayers — those making $444,000 a year or more, and with an average income of $1.17 million. Those taxpayers would receive on average $7,004 a year.[3]

Basic RGB“Follow the money” is good advice. But what you find when you get there is often not a pretty picture.

[1] Aviva Aron-Dine and Tara Straw. House Tax Credits Would Make Health Insurance Far Less Affordable in High-Cost States. Center on Budget and Policy Priorities, March 9, 2017.

[2] Chye-Ching Huang. House Republicans’ ACA Repeal Plan Would Mean Big Tax Cuts for Wealthy, Insurers, Drug Companies. Center on Budget and Policy Priorities. March 8, 2017. http://www.cbpp.org/research/federal-tax/house-republicans-aca-repeal-plan-would-mean-big-tax-cuts-for-wealthy-insurers

[3] Institute on Taxation and Economic Policy. Affordable Care Act Repeal Includes a $31 Billion Tax Cut for a Handful of the Wealthiest Taxpayers. March 2017. http://itep.org/itep_reports/2017/03/affordable-care-act-repeal-includes-a-31-billion-tax-cut-for-a-handful-of-the-wealthiest-taxpayers-5.php

Posted by Peter Fisher, Research Director of the Iowa Policy Project

pfisher@iowapolicyproject.org


A spotlight, not a floodlight, on business breaks

Posted March 21st, 2017 to Blog

A bill in the Iowa House, HSB187, would cut a range of Iowa tax credits, eliminating refundability and capping overall spending on credits. There is significant opposition, because people like their tax breaks. But the issue is suddenly in the spotlight because these and other giveaways are responsible for Iowa’s serious revenue challenge.

There are solutions to the state’s rampant and often unaccountable spending on tax credits and other tax breaks. It is interesting that an interim committee that meets every year to examine a rotating set of tax credits has not produced any reforms. It’s not because reforms are not necessary. Rather, it’s a lack of resolve.

One of several strong recommendations in January 2010 by a Special Tax Credit Review Panel appointed by then-Gov. Culver in the wake of the film credit scandal was for a five-year sunset on all tax credits. This would require the Legislature to re-approve every tax credit.

That would be a start. Another option: Instead of eliminating refundability for all credits, which affects even credits where refundability makes sense (Earned Income Tax Credit), limit it where it does not. The Special Tax Credit Review Panel recommended eliminating refundability for big recipients of the Research Activities Credit (companies with gross receipts over $20 million). Another option would be to cap refundability for all credits at $250,000, which would not harm small players, either businesses or individuals, and would reduce the excessive checks to big businesses.

The scrutiny and demand for a return on investment on these credits would be too much for many of these special arrangements to withstand. Eliminating or capping wasteful credits would free up revenues for other priorities; some would invest more here or there — education, or public safety, or the environment — and some would simply use it to reduce overall spending. But either way, we would have the opportunity for a debate.

There is a danger in putting everything on the table at once. It presents a false equivalency of tax credits — that they are somehow all the same. It ignores the fact that some are for private gain and some for the common good, and some are a mixture. Some work, and some do not.

Some meet the purpose for which they were advertised (the Earned Income Tax Credit, for example, which benefits low-income working families), and some miss the mark with tens of millions of dollars every year (the Research Activities Credit, where most of the money goes to huge, profitable corporations that pay little or no income tax instead of to small start-ups as envisioned).

Iowa’s business tax credits will have risen by half from 2011 to 2021 under current official projections. That is where the spotlight needs to be.

Challenging all credits at the same time gets everyone’s backs up. That is a recipe to assure continued unwillingness to take on any of it. And that will not serve Iowa very well.

Posted by Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org


Tax credit reform, yes — but what kind?

Posted March 9th, 2017 to Blog

Reform of business tax credits in Iowa is long overdue, so the natural instinct is to welcome with open arms the interest of state legislators in a review of Iowa’s runaway spending on tax credits.

Yet, optimism must be tempered. There is a great opportunity; there also are pitfalls.

Fooled us once

Iowa’s last look at tax-credit reform came in the wake of scandal in its film industry tax credit program. Despite a strong report with potentially game-changing recommendations from a special task force of state agency heads in 2010, not much came from the Legislature. As we noted then, legislators acted with fierce caution that no doubt sent the business lobbyists off to celebrate.

That time, the review resulted from a scandal of law and ethics. What remained, and remains today, is a scandal of fiscal ignorance and arrogance. Iowa’s spending on business tax breaks has soared in recent years, and this budget choice has been a contributing factor to the stagnant or declining commitment to public responsibilities: education, the environment, health and public safety.

Fool us twice?

Such skepticism should be understandable not only with the anti-bargaining and anti-worker legislation Iowans have seen in this session, but with comments by legislators. In one shot across the bow, Rep. Pat Grassley stressed legislators would put everything on the table, including the Earned Income Tax Credit (EITC), which benefits low- and moderate-income Iowans.

Past study already has shown that, unlike Iowa’s most lucrative business tax credit, the Research Activities Credit:

•   the EITC has obvious benefits to the economy and Iowa working families.

•   the EITC benefits only people who need the help, where RAC is unlimited and in fact benefits some of the most profitable companies in the country.

•   the EITC benefits people when Iowa’s regressive tax system is otherwise stacked against them, where the RAC benefits those who already do well by Iowa’s tax code.

Already we know that the individual state and local tax system in Iowa — all effectively governed by state law — demands that people at the bottom of the income scale (actually the bottom 80 percent) on average pay 10 percent of their income in tax. At the same time, the wealthiest and most well-connected pay much less — 6 percent at the very top.

Already we know that Iowa’s total state and local taxes on business — again, all effectively governed by state law — are below the national average and by one national business consultant’s measure are among the lowest in the nation.

In a nutshell, heading into this discussion, beware the false equivalencies and more of the same business-lobby spin that has produced the unaccountable and unfair system that makes it difficult to fund critical public services.

And be sure we do not lose some important pieces now in place, including the transparency we have on the RAC with annual reports from the Department of Revenue.

We have called for reform and better oversight for years. If legislators are serious about it, this could be a good thing. If it is merely cover to further burden the poor, reduce transparency, or heap new breaks on corporations that do not pay their fair share, it could be one more step in Iowa’s low-road march to the bottom.

Posted by Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org


Less government means ‘less us’

Posted March 1st, 2017 to Blog

Imagine new occupants of a large historic building who decide to do a major remodeling project, and they do not take the time to learn how the building was built and what previous structural changes were done to the building. They tear into this column, that wall, or that beam, without thinking that these are indeed load-bearing walls and beams that keep the building standing.

The remodeling fever we are seeing in Washington and the Statehouse involve trashing all things public: public schools, public services, public health, and public employees — the load-bearing foundations of democracy and daily life.

The most meaningful insight I gained from serving on the City Council involved learning the functioning of government at the community scale: police protection, fire protection, water, sewer and inspection services, planning services, utilities, arts and cultural services, a fantastic library, community center, great schools and services for children with special needs. I get up every morning thinking about these public services and the people who make them happen, and I am grateful.

That is why I find it astonishing that so many people continue to fall for the falsehood that “government is bad.” Many of us immigrants have come from countries that have fallen apart in violence and disorder in the absence of a functioning government. Thousands of U.S. troops have died to establish a decent governing process in Iraq and Afghanistan, but here at home, we are told government is bad, private-everything is good, corporations are the greatest, and all things public are bad. Do our troops serving in Afghanistan know about the rush to diminish government at home?

Because government means “us,” less government means “less us.” It almost always means more corporate interest, not public interest, making decisions for us, and invariably leads to more inequality, injustice, and disparity. Worst of all, it means fewer public services. We have heard “government should be small,” but why have we not heard “corporations should be small and their influence on government limited?”

Less self-governance, providing fewer services, has produced results: contaminated eggs sickening thousands and contaminated meats killing children because we have not inspected and protected our food supply. Inspection services supposedly are “too much regulation.” Toxic releases, polluted air, contaminated drinking waters, the national financial crisis are all clear and predictable results of “less regulatory burden,” “less government” and more corporate irresponsibility.

Let us not forget that our properties, our lives, our neighborhoods, and our businesses are richer and better because there is police and fire protection, law, order, a system of fair courts, and regulations. We are better off because we are situated in and are beneficiaries of a publicly organized infrastructure that offers basic services to all, including protecting Iowa’s commonwealth which provide ecosystem services such as clean air and clean water. Public works.

While the process of governing ourselves is not perfect and can be improved, “less government” is no improvement. We are the lucky beneficiaries of many generations before us who gave so much to build this nation, but, as many of us immigrants know, democracy and self governance are highly perishable. They are not something we have, but something we have to make every day and nurture through our involvement. Like a garden, you have to tend it.

kamyar-enshayan5464300Kamyar Enshayan served on the Cedar Falls City Council from 2003 to 2011. Enshayan is director of the Center for Energy and Environmental Education at the University of Northern Iowa, where he teaches environmental studies. He has been a member of the Iowa Policy Project board of directors since July 2016.