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Posts tagged Center on Budget and Policy Priorities

Tight margin — big difference

Posted June 22nd, 2018 to Blog

More Iowans than you might expect have a stake in what happens in Washington in the coming days on the Farm Bill. It’s not just farmers.

While the Farm Bill addresses conservation, commodities, rural development, and crop insurance, among other issues, it also carries reauthorization of the Supplemental Nutrition Assistance Program (SNAP) — formerly known as Food Stamps.

In the 2014 Farm Bill, SNAP constituted 80 percent of spending.[i] That investment makes a big difference to about 1 in 9 Iowans — and to the local stores where they use their SNAP benefit. About 350,000 Iowans received SNAP assistance in April of 2018.[ii]

The Senate proposal, which may come to a vote next week, differs markedly from the House bill, which passed 213-211 despite bipartisan opposition. The House bill would cut SNAP for 1 million households, imposing new and unnecessary work requirements on households where people are already working, or unable to work.[iii]

Robert Greenstein, president of the nonpartisan Center on Budget and Policy Priorities, summarized the challenge for low-income working people under the House bill:

Robert Greenstein,
Center on Budget and Policy Priorities

Among those likely to lose food assistance are a considerable number of working people — including parents and older workers — who have low-wage jobs such as home health aides or cashiers and often face fluctuating hours and bouts of temporary unemployment that could put their SNAP benefits at risk. In addition, substantial numbers of people with serious physical or mental health conditions, as well as many caregivers, may struggle either to meet the monthly work-hours requirement or to provide sufficient documentation to prove they qualify for an exemption — and, consequently, may be at risk of losing nutrition assistance.[iv]

The Senate bill looks to improve the SNAP job training program by using feedback from local employers on the skills and opportunities needed in the area. It continues to invest in pilot testing of job training programs, while House-proposed work requirements have not been tested in such state-level pilots.[v]

The bill would also focus assistance on underserved populations, fund nutrition education initiatives, and reauthorize SNAP. It reduces verification barriers for elderly and disabled households by extending certification periods for two to three years.

SNAP is critically important for child development, educational attainment, preventing disease, and lifetime earnings.[vi]

The Senate and House Farm Bill proposals offer decidedly different directions for a proven anti-poverty program that already assures that thousands of Iowans receive nutrition assistance.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

 

[i] United States Department of Agriculture, “Projected Spending Under the 2014 Farm Bill.” January 2018. https://www.ers.usda.gov/topics/farm-economy/farm-commodity-policy/projected-spending-under-the-2014-farm-bill/
[ii] Iowa Department of Human Services, “F-1 Food Assistance Program State Summary – April 2018.” May 2018. http://publications.iowa.gov/27559/
[iii] Center on Budget and Policy Priorities, “House Agriculture Committee’s Farm Bill Would Increase Food Insecurity and Hardship.” April 2018. https://www.cbpp.org/research/food-assistance/chairman-conaways-farm-bill-would-increase-food-insecurity-and-hardship
[iv] Robert Greenstein, Center on Budget and Policy Priorities, “Greenstein: Partisan House Farm Bill Would Turn Clock Back on Efforts to Reduce Hunger and Hardship.” June 21, 2018. https://www.cbpp.org/press/statements/greenstein-partisan-house-farm-bill-would-turn-clock-back-on-efforts-to-reduce
[v] Center on Budget and Policy Priorities, “Senate Agriculture Committee’s Bill Strengthens SNAP and Avoids Harming SNAP Households.” June 2018. https://www.cbpp.org/research/food-assistance/senate-agriculture-committees-bipartisan-farm-bill-strengthens-snap-and
[vi] Feeding America, “Child Food Insecurity: The Economic Impact on our Nation.” 2009. https://www.nokidhungry.org/sites/default/files/child-economy-study.pdf

Housing threat to 65,000 Iowans

Posted June 12th, 2018 to Blog

Over 36,000 low-income households in the state of Iowa depend on rental assistance from the U.S. Department of Housing and Urban Development (HUD)[1] Rental programs are crucially important for the financial security of Iowans who are able to receive benefits. However, 3 of 4 households qualifying for rental assistance are unable to access them due to funding constraints.[2] A proposal from the Trump Administration and a House bill proposed by Rep Dennis Ross seek to further stifle this shrinking program.

Iowans projected to be affected by housing proposals
By congressional district (Source: Center on Budget and Policy Priorities)


In Iowa, the average income of households using rental assistance is just over $12,000. Ninety-seven percent of Iowans using rental assistance fit the category of very low income, meaning they earn 50 percent of the local median income or less. Housing affordability is an issue in both rural and urban areas — 18,700 of Iowa households using rental assistance are in non-metropolitan areas.[3]

The HUD proposal seeks to increase the percentage of a household’s income that they must contribute to rent from 30 to 35 percent. That 17 percent increase is on average a $55 monthly rent increase for families.[4] The changes proposed by the Trump Administration would impact 65,400 Iowans, including 24,600 children. The plan also stands to triple minimum rents for households with a non-elderly or disabled member[5] and eliminate deductions used by the elderly and disabled, and by working families for childcare expenses.

The Ross bill also would eliminate income deductions for eligibility and increase rents for Iowa’s elderly and disabled rental assistance recipients.[6] The bill would impact over 24,400 Iowa households receiving rental assistance; with a 41 percent monthly rent increase for recipients.

Rental assistance encourages work by freeing up household income for work-enabling basic needs such as food, transportation and child care. Secure housing has tremendous impacts on child development including social and emotional well-being, and physical health.[7] These two proposals threaten to destabilize housing for many working low-income households with children, as well as for the elderly and disabled all across the state of Iowa.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. Contact: nveldhouse@iowapolicyproject.org

 

[1] Center on Budget and Policy Priorities analysis of 2016 HUD administrative microdata

[2] Center on Budget and Policy Priorities, “Policy Basics: Federal Rental Assistance.” November 2017. https://www.cbpp.org/research/housing/policy-basics-federal-rental-assistance

[3] U.S. Department of Housing and Urban Development. “Assisted Housing: National and Local Dataset.” 2017. https://www.huduser.gov/portal/datasets/assthsg.html#2009-2017_query

[4] Center on Budget and Policy Priorities, “Trump Plan Would Raise Rents on Working Families, Elderly, People with Disabilities.” April 2018. https://www.cbpp.org/blog/trump-plan-would-raise-rents-on-working-families-elderly-people-with-disabilities

[5] Center on Budget and Policy Priorities, “Trump Plan to Raise Minimum Rents Would Put Nearly a Million Children at Risk of Homelessness.” April 2018. https://www.cbpp.org/blog/trump-plan-to-raise-minimum-rents-would-put-nearly-a-million-children-at-risk-of-homelessness-0

[6] Center on Budget and Policy Priorities, “House Bill Would Allow Sharp Rent Increases on Struggling Low-Income People.” May 2018. https://www.cbpp.org/blog/house-bill-would-allow-sharp-rent-increases-on-struggling-low-income-people

[7] Research and Practice, “US Housing Insecurity and the Health of Very Young Children.” August 2011. https://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2011.300139

 

 

SNAP changes: Ignoring what works

Posted April 19th, 2018 to Blog

EITC and child care more effective than drug tests and work requirements

Work requirements for public assistance seem to be all the rage — at both the national and state levels — when other policies would do more to encourage and support work.

President Trump signed an executive order April 10 enhancing enforcement of federal public assistance work requirement laws, evaluation of program effectiveness, and consolidation or elimination of “ineffective” programs.[1] The Trump administration also is considering drug tests for SNAP (Food Stamp) recipients.[2]

Similar legislation in Iowa (Senate File 2370) intended to expand regulations on and further monitor recipients of public assistance in Iowa, but appears to have stalled as the 2018 session nears an end. This included implementing work requirements, drug testing, quarterly reviews of eligibility, and a one-year residency requirement.[3]

The Farm Bill draft[4] released April 12 would reduce or eliminate SNAP benefits for 1 million households, or 2 million recipients, according to the Center on Budget and Policy Priorities (CBPP). Work requirements would force able-bodied adults without dependents to prove every month that they work or participate in a training program 20 hours per week. Severe sanctions for noncompliance would cut off benefits for one year the first time — three years the second.[5]

Recent research found recipients under work requirements for Temporary Assistance to Needy Families (TANF) continued to live below the federal poverty level, and that small increases in employment diminished over time and did not result in stable employment in most cases.[6] In the long term, programs that provide training, skill building, and educational opportunities to recipients are shown to be more successful than only implementing work requirements.[7]

Evidence shows that people in SNAP households who can work do work. More than 80 percent work during the year before or after receiving benefits.[8]

Drug testing public assistance recipients has proven to be costly and frivolous. States that have implemented drug testing found that applicants have lower drug usage rates than the general population. The state of Missouri spent $336,297 in 2015 to test 293 of 31,336 TANF applicants and found only 38 positive results.[9]

Eleven percent of Iowans received public assistance in February of 2018.[10] Already, able-bodied adult without dependents have work requirements to receive SNAP in the state of Iowa.[11]

By contrast, the Earned Income Tax Credit and Child Care Assistance (CCA) are policies that are effective in encouraging work. In addition, Iowa could make changes in work support programs, such as CCA,[12] to reduce what are known as “cliff effects” — when families with a pay raise or a new job are faced with a net loss because a reduction in benefits exceeds the new income.

Policies that support working families, not drug testing and work requirements, would do more to encourage work, raise family incomes, and boost local economies.

 

[1] The White House, “Executive Order Reducing Poverty in America by Promoting Opportunity and Economic Mobility.” April 2018. https://www.whitehouse.gov/presidential-actions/executive-order-reducing-poverty-america-promoting-opportunity-economic-mobility/

[2] Associated Press, “Drug testing plan considered for some food stamp recipients.” April 2018. https://www.apnews.com/6f5adff5efeb4f9a9075f76bf9cf5572

[3] IA Legis, “Senate File 2370” February 2018. https://www.legis.iowa.gov/legislation/BillBook?ga=87&ba=SF2370

[4] House Agriculture Committee “H.R. 2: the Agriculture and Nutrition Act of 2018.” April 2018. 115th Congress. https://agriculture.house.gov/uploadedfiles/agriculture_and_nutrition_act_of_2018.pdf

[5] Center on Budget and Policy Priorities, “Chairman Conaway’s Farm Bill Would Increase Food Insecurity and Hardship.” April 2018. https://www.cbpp.org/research/food-assistance/chairman-conaways-farm-bill-would-increase-food-insecurity-and-hardship#_ftn1

[6] Urban Institute, “Work Requirements in Social Safety Net Programs.” December 2017. https://www.urban.org/sites/default/files/publication/95566/work-requirements-in-social-safety-net-programs.pdf

[7] Center on Budget and Policy Priorities, “Work Requirements Don’t Cut Poverty, Evidence Shows.” June 2016. https://www.cbpp.org/research/poverty-and-inequality/work-requirements-dont-cut-poverty-evidence-shows

[8] Center on Budget and Policy Priorities, “Making SNAP Work Requirements Harsher Will Not Improve Outcomes for Low-Income People.” March 2018. https://www.cbpp.org/research/food-assistance/making-snap-work-requirements-harsher-will-not-improve-outcomes-for-low

[9] Center on Law and Social Policy, “Drug Testing SNAP Applicants is Ineffective and Perpetuates Stereotypes.” July 2017. https://www.clasp.org/sites/default/files/publications/2017/08/Drug-testing-SNAP-Applicants-is-Ineffective-Perpetuates-Stereotypes.pdf

[10] Iowa Department of Human Services, “Food Assistance Report Series F-1.” March 2018. http://publications.iowa.gov/27299/1/FA-F1-2016%202018-03.pdf

[11] Iowa Department of Human Services, “ABAWD Letter.” September 2017. https://dhs.iowa.gov/sites/default/files/470-3967.pdf

[12] Peter S. Fisher and Lily French, Iowa Policy Project: Reducing Cliff Effects in Iowa Child Care Assistance, March 2014. https://www.iowapolicyproject.org/2014docs/140313-CCA-cliffs.pdf

 

2018-NV-6w_3497(1)Natalie Veldhouse is a research associate at the nonpartisan Iowa Policy Project.

nveldhouse@iowapolicyproject.org

Don’t emulate North Carolina, either

Posted March 7th, 2018 to Blog

The ideologues advocating for large state income tax cuts haven’t given up defending the Kansas experiment, despite overwhelming evidence that it forced drastic budget cuts while doing nothing to stimulate growth. Now they would have us believe that North Carolina provides an even better example of the benefits of the tax-slashing strategy. It doesn’t.

Two recent analyses of the North Carolina tax cuts, which took effect in 2014, show pretty clearly that the cuts did not boost the economy, and that they will soon precipitate large budget shortfalls. Prior to the tax cuts, the state’s economy generally grew at a comparable rate to the surrounding states, despite North Carolina having higher personal income tax rates than its neighbors. And it outpaced the national economy, jobs in North Carolina growing at 5.8 percent from late 2001 through the end of 2013, compared to 4.2 percent for the nation.

Since the tax cuts took effect in 2014, has North Carolina’s economic performance become even more impressive? On the contrary; since 2014, North Carolina has lagged behind the nation in growth in jobs and GDP, and has also lagged behind neighboring Georgia and South Carolina.

The tax-cut advocates are fond of saying simply that since the tax cuts, North Carolina has experienced rapid growth. The state has certainly grown faster than Kansas, but nothing in the evidence suggests that the tax cuts boosted growth; in fact, relative to its neighbors and to the nation its performance declined after taxes were cut.

The North Carolina tax cuts were phased in from 2014 through 2019, and by next year will cost the state 15 percent of the general fund budget. Major fiscal challenges now loom on the horizon. The state’s budget analysts project a structural budget shortfall of $1.2 billion in 2020, with the shortfall rising after that.

Tax and budget cuts are a formula for decline, not prosperity. Over the past decade, North Carolina has cut per student funding for education — K-12 by 7.9 percent, higher education by 15.9 percent, when adjusted for inflation — and the tax cuts will make it difficult, if not impossible, to restore those funds, no less to increase its investments in the state’s children. They are putting the long-term prosperity of the state at risk.

These results are not surprising. Tax cuts have budget consequences; they do not pay for themselves through growth. In fact, the preponderance of serious research finds that the effects of state income taxes on state growth are negligible.

Let’s hope Iowa does not follow either Kansas or North Carolina down the path of chronic budget crises and underfunding of the state’s responsibilities for education, health and public safety.

Peter Fisher is research director of the nonpartisan Iowa Policy Project. pfisher@iowapolicyproject.org

Cliff ahead: Learn from Kansas

The Iowa Senate is poised to move a massive tax cut bill out of committee today, in the belief that somehow what was a disaster in Kansas will be a big success in Iowa.

Despite chronic revenue shortfalls that have forced a series of mid-year budget cuts over the past two years, and the prospect of a tight budget for next year, Senate Republicans propose to cut $1 billion a year from the state budget. They are moving the bill forward without even an analysis of its impact.

Proponents claim this will make Iowa more competitive and boost the economy. There are two problems with this claim. First, two major accounting firms that rank states on their level of business taxation continue to put Iowa right in the middle of the pack, or even better. We are already competitive. Ernst & Young (below) ranks Iowa 29th, while Anderson Economic Group’s measure ranks Iowa 28th — in both cases, showing little difference across a broad middle range of the scale.

Second, there is good reason to expect the bill to have negative effects on the economy, not positive. When Kansas enacted major cuts to state income taxes in 2012 and 2013, the Governor and his friends at ALEC (the American Legislative Exchange Council) lauded this experiment — which five years later has proven to be a dramatic failure.

Abundant evidence shows the tax cuts failed to boost the Kansas economy. In the years since the tax cuts took effect Kansas has lagged most other states in the region and the country as a whole in terms of job growth, GDP growth, and new business formation.

When confronted with the Kansas failure, the bill’s proponents respond that the only problem in Kansas was that they failed to cut services sufficiently to balance their budget. But here’s the problem: Their constituents were up in arms over the cuts they did enact; they would not have stood for anything more drastic.

In order to bring the budget somewhat back in balance, Kansas borrowed from the future, using up reserves, postponing infrastructure projects, and missing contributions to the pension fund. Schools closed weeks early when state funding ran out. Had they cut spending further, that would have put a bigger dent in the economy, as recipients of government contracts were forced to retrench and workers laid off spent less in the local economy.

A supermajority of the Kansas Legislature voted to end the experiment last year, recognizing it as a failure and responding to the demands of Kansas citizens to restore funding to education, highways, and other state services they rely on. That decision no doubt saved the state economy from performing even worse in the years to come.

The Senate bill would harm Iowa in much the same way. Education accounts for over half of the state budget. Tax cuts of this magnitude would have very serious consequences for our public schools, and would force tuition up drastically at community colleges and regents institutions. Our court system would be forced into further personnel cuts, meaning long delays for those seeking justice. We would see more children suffer as family service workers face ever higher caseloads.

Proponents claim the Senate plan is “bold.” So is jumping off a cliff.

Peter Fisher is research director of the nonpartisan Iowa Policy Project. pfisher@iowapolicyproject.org

 

Related from Peter Fisher:

The Lessons of Kansas

The Problem with Tax Cutting as Economic Policy

Kansas poses warnings for Iowa

IFP News:

Failed tax-cut experiment shows states how not to proceed
New report exposes the danger of supply-side tax-cutting by states

Basic RGB

 

IOWA CITY, Iowa (Jan. 24, 2018) — A new report shows Iowa lawmakers should pay attention to the failed experiment in Kansas and focus any tax changes on fairness and stabilizing revenues for education and other critical services.

“Kansas tried cutting taxes to promote economic growth in 2012 and instead wound up lagging its neighbors — including Iowa — and the nation, forcing cuts in school funding and other needs,” said Peter Fisher, research director of the nonpartisan Iowa Policy Project (IPP).

The new report from the Center on Budget and Policy Priorities is the latest illustration of why Kansas shows how not to proceed. And now that this is clear, tax-cut proponents have backed off their earlier celebration of Kansas.

“It’s a bad risk for our state,” Fisher said. “It is being driven by outside forces and ideology, and we already know it does not work.”

In 2012, tax-cut supporters said Kansas would boost its economic competitiveness by sharply curtailing taxes on high-income people and businesses. While Kansas Governor Sam Brownback had called the cuts a “shot of adrenaline into the heart of the Kansas economy,” the result left tax-cut supporters scrambling for excuses, saying that the Brownback experiment was tainted.

CBPP, however, found the Kansas tax cuts to be a valid test of supply-side economics. That they failed the test is not a surprise. The CBPP report as well as previous IPP research by Fisher, available at www.gradingstates.org, shows that the preponderance of academic research has found that personal income tax cuts typically produce little if any economic growth.

From December 2012 (just before the tax cuts took effect) to May 2017 (just before they were repealed) jobs in Kansas grew only 4.2 percent, below all of its neighbors except Oklahoma and less than half of the 9.4 percent job growth in the United States.

Yet in Iowa, promises of tax changes are coming with a heavy dose of the failed supply-side, trickle-down approach. And work on the changes is — so far — behind closed doors.

“Iowa’s tax discussion from start to finish belongs out in the open. The impacts will be felt by all Iowans, and all Iowans should be at the table — with legitimate analysis like that from CBPP, IPP’s Peter Fisher and other respected Iowa economists, to be front and center,” said Mike Owen, executive director of IPP.

The Iowa Fiscal Partnership has identified keys to responsible tax reform, which includes eliminating federal deductibility as Governor Reynolds has proposed to reduce tax rates that appear higher than they are — but only if that change comes without a reduction in revenue, and does not increase the overall inequity in Iowa taxes that favors the wealthy.

“At a time of budget shortfalls, we cannot afford to lose more resources for schools and vulnerable families, and in any case we need to introduce more fairness in taxes to reflect Iowans’ ability to pay,” Owen said.  “Currently, the bottom 80 percent of Iowa working-age households pay — on average — 10 percent of their income in state and local taxes, and the wealthier pay steadily less. New income-tax cuts at the top would make this worse.”

CBPP’s research found that Kansas’s tax cut experiment was a valid — and failed — real-world test of supply-side economics for the following reasons:

  • Kansas sharply curtailed spending after enacting the tax cuts. Some argue that the tax cuts didn’t produce economic growth because lawmakers didn’t follow it with spending cuts, but this does not match reality. State spending was tightly restricted in the aftermath of the tax cuts. Between fiscal years 2012 and 2016, Kansas’s General Fund spending rose only 0.3 percent without adjusting for inflation and fell 5.5 percent after adjusting for inflation and population growth. If Kansas had cut spending more, its economic and job growth would have been even more lackluster as teachers, nursing home aides paid with Medicaid funds, private road maintenance contractors compensated with Highway Fund dollars, and others employed by the state would have had less money to spend locally.
  • Downturns in agriculture, energy, and airplane manufacturing don’t explain the tax cuts’ ineffectiveness. Some have cited the decline of oil, gas, and commodity prices, as well as a decline in Kansas’s energy sector to help explain the state’s poor economic performance. But the aircraft manufacturing and energy sectors are too small a part of the Kansas economy for their downturns to appreciably affect the state’s job creation record. The two sectors lost 2,500 and 3,100 jobs, respectively, between 2012 and mid-2017 — well under 1 percent of the state’s total employment. And, while combined earnings of farmers fell significantly in Kansas in the years following the tax cuts, all of the state’s neighbors except Nebraska had even bigger declines, as did the country overall. Despite this, Kansas’ job growth still lagged behind all but one of its neighbors.
  • Kansas’s exemption of “pass-through” income from the income tax led to only modest tax avoidance. The exemption for pass through income — that is, income from businesses such as partnerships, S corporations, and sole proprietorships that filers report on individual tax returns — did create an incentive for various kinds of tax avoidance strategies. But the Kansas Department of Revenue’s own data shows that there was, at most, only a small and temporary uptick in the number of pass-through business formations that might have been due to tax avoidance.

“Some will continue to argue that Kansas’s fiscal and economic struggles after its tax cuts aren’t relevant to other states, but plenty of evidence says that they are. Other states should be very cautious in pursuing tax cuts in the name of supply-side economics because time and time again we have seen this approach fail,” said Michael Mazerov, author of the report.

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The Case of the Missing Middle-Class Tax Cut

Posted November 22nd, 2017 to Blog

If Sherlock Holmes were a United States Senator, he’d be on it: “The Case of the Missing Middle-Class Tax Cut.”

We’ve all heard about the suspicious tax cut. It’s been in all the papers, all the social media posts, anywhere the spin merchants can find a way to promote the idea that the proposed massive and permanent tax-cut giveaway to millionaires, billionaires and corporations is somehow a “middle-class tax cut.”

Puh-leeze.

No reliable information can justify the billing. Middle-class and lower-income taxpayers ultimately will — on average — pay more as a result of this legislation if it becomes law.

In Iowa, the Institute on Taxation and Economic Policy (ITEP) has shown that despite some minor benefits upon enactment, the bill when fully phased in will actually result in a tax increase, on average, for the bottom 60 percent of Iowa taxpayers. Higher up the income scale, tax cuts will remain. (In the graph below, average tax changes for the bottom three quintiles of Iowa taxpayers are shown as increases, above the line.)

Someone in Iowa making $1.5 million in 2027 would get about a $4,800 benefit under the ITEP analysis — not a lot to people at that income, maybe a good payment on luxury box rent at the ballgame.

But that break for the top 1 percent would total about $68 million — a hit to services on which the money could be spent on behalf of all.

Millions of Americans — an estimated 13 million — would lose health insurance under this bill, a large share of those not giving up insurance voluntarily, but because they could no longer afford it.

Billion-dollar estates that already have $11 million exempt from tax under current law would see a doubling of that exemption, as if the first $11 million free and clear is not enough while the millions of working families struggle to get by, some at a $7.25 minimum wage that has not been raised in over eight years (in Iowa, 10 years).

A Child Tax Credit designed to help working families with the costs of raising children would be extended to families earning $500,000 a year — as if those families need the extra help, when families making $30,000 get little from the deal. By the way, that is one of the changes billed as a middle-income break, and even it would expire in 2025.

There is no expiration, meanwhile, on the estate-tax break or on new giveaways to corporations.

If you’re looking for a real middle-class tax cut in this legislation, you’d better put Sherlock Holmes on the job. Even then, anything you find has an expiration date, plus tax increases. And the millionaires’ cuts that remain will clamp down on resources for the essential things that government does to protect and assure opportunity for us all, and our nation’s future.

You cannot afford to do both — provide critical services and also cut resources to pay for them.

It’s elementary.

Mike Owen, executive director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

More debt, inequity and pain

​FOR IMMEDIATE RELEASE, Tuesday, Nov. 14, 2017

Senate tax plan: More debt, more inequity, more pain
Like House bill, Senate plan stacks the deck against services and opportunity

IOWA CITY, Iowa (Nov. 14, 2017) — Senate Republicans’ new tax proposal in Washington carries many of the same problems of equity and fiscal irresponsibility of the House plan.

“This plan is not only unbalanced. The scales are being tipped all the way over,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project (IPP). “Adding $1.5 trillion in debt at the almost certain cost of food and health assistance for the vulnerable and educational opportunities across the board — really, did anyone promote doing that in the last campaign? Did anyone vote for it?”

In addition, the nonpartisan Institute on Taxation and Economic Policy has released new estimates showing that for Iowa, well over half of the tax reductions would go to the top 20 percent in both 2019 and 2027 under the Senate plan. Some taxpayers would pay more, but very few of those at the top — 2 percent — while in both years, 13 percent of the middle one-fifth of taxpayers would pay more. [Find the full ITEP report here]

“Overall, these are especially troubling implications for Iowa, with daunting fiscal challenges coming in only two months with the new legislative session. Besides penalizing low-income families at a steep cost to all taxpayers, this plan would shift new costs to the state, which is becoming a common theme in Washington,” said Mike Crawford, senior policy associate for the Child & Family Policy Center (CFPC) in Des Moines.

“This Congress, many will recall, also attempted to shift hard choices and big costs to the states with health-care proposals that, thus far, have been unsuccessful. The tax choices being offered in the House and Senate threaten state resources and services as well.”

Specifically, the Senate bill would eliminate the federal income tax deduction for state and local taxes paid. The largest beneficiaries of this deduction are high-income taxpayers.

“This change could pressure states to make new reductions in taxes for those taxpayers — who already pay a smaller share of their income in state and local taxes than do low- and moderate-income taxpayers,” Owen said. “Furthermore, this would cut into revenues, which already are running short of expectations and pose difficult choices for state legislators in January.”

The bill would provide nearly half of total tax benefits to the top 1 percent of households, which would receive tax cuts averaging over $50,000 by 2027. In addition, the legislation would:

  • Skew a critical tax credit now targeted for low-income working families, the Child Tax Credit (CTC), to couples with incomes between $110,000 and $1 million. While extending this benefit to those higher-income families, it would deny any significant help ($75 or less) to 10 million children in low-income working families. The Center on Budget and Policy Priorities estimates that in Iowa, the House bill would totally leave out 89,000 children in those working families, and either fully or partially exclude 203,000 from the bill’s increase in that benefit.
  • Further reduce the federal estate tax, which already carries significant exemptions from tax for the very wealthy — $5.5 million per person and $11 million per couple. Because of these already generous exemptions, the estate tax already only affects two-tenths of 1 percent of estates nationally and in the state of Iowa. It is the only way a small amount of tax is collected on certain income. (The House bill would fully phase out the estate tax.)
  • Cut taxes for millionaire households by lowering the top income tax rate compared with the House bill, and by providing a deduction for “pass through” businesses that mean big tax cuts for high-income households.

“Elements of the Senate bill make only slight improvements to the House bill, and like the House bill it is heavily skewed to the wealthy,” Owen noted.

“Take the example of the Child Tax Credit. This program is intended to be a work support, to assist people in low-paying jobs. In our low-wage state especially, it makes no sense to be extending this credit to wealthy families when low-income families are being left out of an improvement.”

Unlike the House bill, the Senate bill would not cut the wind production tax credit, which has been critical in making Iowa a leader in clean energy.

IPP and CFPC are nonpartisan, nonprofit Iowa-based organizations that collaborate as the Iowa Fiscal Partnership on analysis of public policy choices affecting Iowans, particularly those in working families and at low incomes. Find reports at iowafiscal.org.

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Iowa can fix health marketplace

Posted November 2nd, 2017 to Blog

Guest post by Sarah Lueck, senior policy analyst at the Center on Budget and Policy Priorities. She wrote this piece originally for CBPP’s “Off the Charts” blog. Find the original post here.

Iowa Can Strengthen Health Insurance Market Without Harming Consumers

October 24, 2017

Now that Iowa has withdrawn its request for a federal “1332 waiver” to allow it to change its health insurance market, some state officials are blaming what they say are overly strict federal requirements for approving such waivers. But, in reality, those requirements served their intended purpose of protecting consumers. While Iowa’s individual market faces challenges, Iowa consumers will benefit from the fact that the marketplace coverage on which they have come to depend will still be available when open enrollment begins on November 1.

In its waiver, Iowa proposed eliminating the Affordable Care Act (ACA) marketplace that consumers have used since 2014 to apply for coverage and subsidies, creating one standard health plan for all individual market consumers, providing a flat premium credit based on age and income to every enrollee (including those with high incomes), and establishing a reinsurance program to shield insurers from the financial risk of high-cost enrollees.

Federal law requires states to show that their section 1332 waivers will provide coverage that’s at least as affordable and comprehensive as under current law and will cover as many people, without increasing the federal budget deficit. These “guardrails” helped protect consumers from Iowa’s severely flawed proposal:

  • Iowa’s waiver would have made it harder to sign up for coverage. The waiver would probably have raised the number of uninsured individuals by making enrolling far more cumbersome. Iowans now use HealthCare.gov to receive a federal determination of eligibility, pick a plan, and then go directly to the insurer’s website to pay the first month’s premium — often in one sitting. Under the waiver, enrollees would have had to visit a new website to complete an eligibility application, wait up to ten days for the state to respond by mail, and then find an insurer or an insurance agent to actually help them enroll in a plan.It was far from clear that the state’s website would be ready in time, or that thousands of Iowans could complete this lengthy, multi-step process in the six-week open enrollment period. On top of that, the waiver would have eliminated automatic re-enrollment for current marketplace consumers.
  • Iowa’s waiver would have made health care less affordable for many. The waiver would have required everyone with incomes over 200 percent of the poverty line to enroll in a plan with a $7,350 deductible. Under the ACA, Iowans with incomes up to 250 percent of poverty can get cost-sharing reductions, which lower their deductibles and co-payments. And Iowans at all income levels can buy a “gold plan” with a $1,000 deductible in 2018, which wouldn’t have been an option under Iowa’s waiver.
  • The state’s unrealistic funding assumptions would have put coverage and care for even more Iowans at risk. The waiver relied on unrealistic assumptions about the cost of the proposed changes, as outside analysts found and the Trump Administration’s response to Iowa implied. Had the waiver received federal approval, the federal government would have been legally precluded from providing more funding than Iowa would receive under current law. That would likely have left the state with a funding shortfall, forcing it to make cuts in 2018 by reducing people’s coverage, raising premiums or cost-sharing charges, or reducing enrollment.

Iowa’s marketplace will be open for new enrollment on November 1. Iowa’s decision to drop the waiver clarifies that individual market consumers can shop for coverage using HealthCare.gov, just as they have for several years. An insurer, Medica, has proposed plans in all of the state’s 99 counties, and most of the available plans have lower deductibles than those that would have been available under the waiver.

While Iowans are understandably concerned about reported premium increases, an estimated 75 percent to 80 percent of Iowans in the ACA-compliant individual market will be eligible for premium tax credits that grow in response to premium increases, limiting consumers’ costs to a set percentage of their incomes. Also, many people with low incomes can enroll in a “silver plan” with reduced deductibles and other cost sharing due to the ACA’s cost-sharing reductions.

After withdrawing its waiver, Iowa can now turn to more practical and less disruptive proposals to improve affordability and increase competition in its insurance market. Like other states’ individual markets, Iowa’s market has been hurt by Trump Administration actions that undermine the ACA marketplaces. For example, Medica reports that about one-fifth of its proposed rate increase reflects the risk that the federal government would stop reimbursing insurers for cost-sharing reductions, as the Administration has chosen to do. In addition, Iowa’s individual market has experienced greater challenges than most other states’, in part reflecting Iowa’s policy choices. To address these challenges without undermining coverage for current marketplace consumers, Iowa should consider:

  • Creating a reinsurance program similar to Alaska’s, which would reduce premiums for Iowans with incomes too high to qualify for marketplace subsidies. A reinsurance program was one element of the Iowa waiver, but the state could easily implement it without the waiver’s harmful changes.
  • Phasing out more pre-ACA plans (“transition” and “grandfathered” plans) as soon as possible. These plans are exempt from many of the ACA’s consumer protections and continue — several years after the law’s implementation — to keep healthier enrollees away from the ACA marketplaces. About 76,000 Iowans are expected to remain in these plans in 2018, compared to 51,000 to 55,000 who are expected to enroll in the marketplace. That pushes up premiums for ACA-compliant plans because these plans attract fewer of the healthier potential enrollees than otherwise, and it thus creates an uneven playing field for insurers that might otherwise participate.
  • Avoiding actions that would further skew Iowa’s risk pool. Gov. Kim Reynolds said Monday that “short-term” health insurance that doesn’t meet ACA standards could be a solution for Iowa consumers in 2018. That refers to President Trump’s recent executive order< directing federal agencies to (among other things) consider ways to make short-term plans, which currently may last no more than three months, last nearly a full year, which would make them a full-scale alternative to the ACA market — even though they don’t have to cover the ACA’s essential health benefits such as maternity care and mental health treatment, and even though they can base premiums on people’s health status. That’s not a good solution for Iowa. Making short-term plans more widely available would pull even more healthy consumers out of the ACA market, dramatically increasing the state’s already serious challenges while leaving many consumers in extremely skimpy plans and leaving those in ACA-compliant plans with even higher premiums.

About those 10 reasons, Senator …

Posted September 22nd, 2017 to Blog

Senator Chuck Grassley of Iowa has made the point himself: The Cassidy-Graham bill to repeal the Affordable Care Act (ACA) has many deficiencies.

“I could maybe give you 10 reasons why this bill should not be considered,” he told Iowa reporters.

So, let’s look at some of the reasons, on the merits, why people might have concerns about Cassidy-Graham.

  1. People with pre-existing conditions would lose access to health care. Protection of these people assured now under the ACA would be left to state decisions, with states already cash-strapped.
  2. Many who became eligible for coverage through the Medicaid expansion of the ACA would lose it. In Iowa, about 150,000 people gained coverage by this expansion.
  3. It would change Medicaid expansion to a block-grant program that provides states no flexibility to deal with recessions or prescription drug price increases.
  4. Medicaid for seniors, people with disabilities, and families with children would be capped on a per-person basis. Anything higher would be left to the states to provide. There is neither any assurance states would want to do that, or even be financially able to do so.
  5. Iowa would be marched to a $1.8 billion cliff in 2027 under this bill, with federal support dropping sharply. For context, that is the equivalent of about one-fourth of the current state budget.
  6. Millions would lose insurance coverage. While we’re still waiting for the estimate from the Congressional Budget Office, past repeal proposals show this. And, since this bill offers nothing beyond 2027 for the Medicaid expansion, via block grant or otherwise, the prospect of 32 million people losing coverage (as demonstrated in estimates in previous ACA repeal legislation) is very real.

In Iowa? The graph below shows how Iowa’s uninsured population has dropped with the advent of the ACA, or Obamacare. Census data show uninsurance in Iowa dropped by nearly half in just three years, by about 116,000 — from 8.1 percent uninsured in 2013 to 4.3 percent in 2016.

So, this is a good start on why Iowans might be concerned about Cassidy-Graham — a last-ditch effort to rush into law radical changes in the way millions nationally and over 100,000 in Iowa gained access to health care in just three years.

We invite Senator Grassley to add to the list and get us to the full 10 reasons he suggested that might cause concerns about this bill.

Or better yet, maybe together in a deliberative process that involves everyone, we can come up with a list of 10 things that any health care policy should address.

Surely the list would include insuring more people, assuring more with practical access to health care when they need it, improving public health and reducing costs. We invite Senator Grassley to that discussion.

Mike Owen, Executive Director of the  Iowa Policy Project
mikeowen@iowapolicyproject.org