3) Cleaning up and restoring balance to our tax code would better assure public money is going to public purposes, rather than subsidizing tax breaks and loopholes for those most politically well-connected. As we have shown: •     Tax credits for business already cost more than $300 million a year. •     Tax loopholes for multistate and multinational corporations already cost between $60 million and $100 million. On Tax Day — and every day — we must ask whether those choices are the best use of public money, when we know education, public safety and environmental quality are being compromised by short-sighted budget decisions in Des Moines. Mike Owen is executive director of the nonpartisan Iowa Policy Project. mikeowen@iowapolicyproject.org

With the 2019 session of the Iowa Legislature officially underway, the Iowa Policy Project is a dependable source for quality information and analysis on Iowa’s most pressing policy challenges. IPP’s Roadmap for Opportunity project will highlight and clarify many of these challenges as they emerge. Among issues to watch:

Public funds for private schools

Vouchers or “education savings grants” stand to take more money away from public schools and add to the $66 million Iowa taxpayers pay every year to support private education. Funding for Iowa’s public schools has failed to keep up with rising costs. Underfunded schools impact student development and workforce potential. Read more in our Roadmap piece, “Strengthening public education, no new subsidies to private schools” and the accompanying backgrounder, “Taxpayer support of private education in Iowa.”

Unemployment compensation

Unemployment insurance is an important program that supports workers experiencing temporary unemployment and acts as a macroeconomic stabilizer during economic downturn.[1] Because states are granted flexibility in shaping the program, there lies potential to undermine it, as other states have recently. More to come on this issue.

Attacks on public pensions

Maintaining a strong public pension system in Iowa ensures that we are able to attract and retain quality state employees who teach our children and protect our communities. It is important that Iowa wards off attempts to restructure the Iowa Public Employees’ Retirement System (IPERS) in ways that erode retirement security. For more, read our Roadmap piece, “IPERS works to boost retirees, economy.”

Further tax cuts

During the 2018 session, legislators passed a package of tax changes that largely benefit wealthy Iowans, with 2.5 percent of Iowa earners taking nearly half of tax cuts. The current administration has signaled support for further cuts that would endanger services that promote thriving communities such as education and healthcare. Read more on “What real Iowa tax reform would look like.”

Protecting Iowans’ health

Iowa’s privatized Medicaid system continues to cut off patient care and miss payments to providers. With little hope of returning the program to state control anytime soon, we must ensure that cost savings are achieved by increasing innovation and efficiency, not by undercutting health care providers or denying services to the sick and disabled. We should also stay away from Medicaid work requirements, which lead to disenrollment and additional barriers for elderly and disabled Iowans without meaningfully improving employment.[2] For more, read out Roadmap piece, “Restoring success of Iowa Medicaid.”

As noted above, this is not an exhaustive list — only a start. Stay up to date on our analysis through Facebook, Twitter, and our email newsletter.

[1] Chad Stone and William Chen, “Introduction to Unemployment Insurance.” July 2014. Center on Budget and Policy Priorities. https://www.cbpp.org/sites/default/files/atoms/files/12-19-02ui.pdf

[2] Center for Law and Social Policy, “Medicaid Works: No Work Requirement Necessary.” December 2018. https://www.clasp.org/publications/report/brief/medicaid-works-no-work-requirement-necessary

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

At the Iowa Policy Project, we are nonpartisan and we do not support or endorse candidates for office. Rather, we hope those who do, and the candidates and parties themselves, will conduct their discussions on a foundation of fact.

When they do not, we just might throw a penalty flag. Our work is public policy research and analysis, to help people see what is fact and what is not, and to introduce context where it is missing. This is not always easy with complex issues, and there are gray areas. Where bad information is being spread, that interferes with the mission of our work, so we will do what we can to keep that record straight.

Very early in Wednesday’s debate between Governor Kim Reynolds and businessman Fred Hubbell, the Governor made at least two clearly unsupportable claims about taxes. These are issues we cover constantly.

First, the 2018 tax overhaul not only was costly, but overwhelmingly benefited the wealthiest. Any suggestion to the contrary is simply unsupportable, using data provided by the Iowa Department of Revenue in May before the bill passed. Those supporting the bill knew this would be the impact, and those writing it drew it that way.

According to the department, the legislation will mean either no change, or an actual tax increase, to nearly a quarter of resident taxpayers — 23.3 percent — in tax year 2019. For those who receive cuts, the average cut for millionaires was projected to be $20,021; for someone between $60,000 and $70,000 adjusted gross income, the cut was projected to be a tiny sliver of the benefit compared to millionaires — $232.

This flatly negates the Governor’s comment that, “In 2019, virtually every single Iowan will see their taxes go down.” This is clearly inaccurate. Further, as the law is phased in, the continuing impact will be that some will lose, some will not. Unquestionably it will affect public services as hundreds of millions in revenues are cut — which means Iowans who depend upon those services, and that is most Iowans, will lose even more.

Second, the Governor in pushing for new corporate tax cuts chose to play to the myths about business taxes promoted by the business lobby to drive down Iowa’s already low business taxes.

Business consultants have exposed the hollow core of this claim, most recently the Anderson Economic Group, which in June ranked Iowa 15th lowest in state and local business taxes (all of which are governed by state policy). Iowa business taxes consistently have been shown to be competitive.

For more information about both the tax legislation and Iowa taxes on business see these resources:

What real Iowa tax reform would look like, Iowa Policy Project “Roadmap for Opportunity” series, August 2018.

Iowa tax overhaul: Sorting facts, key points from spin, Iowa Fiscal Partnership, May 2018

Iowa can unlock the potential of each individual and allow all workers to share in the fruits of their labor by making public investments in the foundations of a strong economy. Well-resourced schools, access to higher education, decent wages and protections, economic supports, clean water and renewable energy, and a cleaned-up tax system, all can pave the way to opportunities and broadly shared prosperity that Iowans want.

Unfortunately, policy choices have put us on a road that prioritizes corporate profits over worker wages and corporate tax cuts over the public investments that allow for a strong, sustainable economy. We are at a crossroads and our policy choices today and in the near future can either pave the path to economic opportunity in every corner of our state, or create roadblocks to prosperity for everyday Iowans.

Our people-first roadmap offers the way forward. It lays out the evidence-based, responsible solutions to our state’s most pressing issues, pinpointing several stops along the way that would mark progress for our state, such as:

Creating the workforce of our future and ensuring our children reach their potential. Iowa can and should ensure K-12 schools receive the funding they need for every child to succeed, no matter where they live. We also must restore our commitment to higher education with more state support, lower tuition, and aid to reduce student debt.

Boosting economic security and supports for working Iowans. Giving Iowans’ lowest wage workers a long overdue raise, ensuring workers get paid what they’re legally owed, shoring up our system of compensation for workers who get hurt on the job, and restoring worker rights to collective bargaining can ensure that all Iowa workers are getting a fair deal. Iowans also need a boost in child care assistance, which can make or break the ability of a family to work.

Restoring a public commitment to the health and well-being of every Iowan, particularly seniors and people living with disabilities. Reversing the privatization of Medicaid and pursuing cost savings through innovation and efficiency rather than reduced services and worker wages are critical steps to ensuring access to health care for all Iowans — now and in the future.

Ensuring clean water and renewable energy for a healthy, sustainable Iowa. We can and must balance the state’s need for clean and abundant water with our agricultural economy by reducing water pollution. Likewise, Iowa should restore its legacy of leadership in renewable and efficient energy in order to create a cleaner, greener state for future generations.

Cleaning up and restoring balance to the tax code. Right now, Iowa asks the lowest income Iowans to pay a higher share of their income in state and local taxes than those with the highest incomes. We can fix this by cleaning up corporate tax loopholes that squander precious public dollars that could otherwise be invested in shared opportunity for Iowans.

Iowa is at a critical juncture. We can take the high road that leads to progress and shared prosperity, or go down a dead end. The policies in this roadmap provide a clear route to a stronger Iowa. For more detail on each stop on the roadmap, please click here.

• Owen prepared testimony for public hearing
• Iowa Fiscal Partnership Tax Policy Kit
• Peter Fisher’s IFP brief: Governor’s tax-cut plan sets stage for service cuts

Senator Joni Ernst is using Facebook to gin up support for the new tax bill. It is a one-sided picture, to say the least.

So, what does it really mean for Iowans that the tax bill is law?

• Middle and low-income Iowans will see temporary ​tax cuts in the short term that are ​drastically smaller​​ than those high-income taxpayers will see — and these will be taken away or turned into tax increases by 2027 to help pay for permanent tax cuts for corporations.
• Millions of people nationwide will lose health insurance coverage as elimination of the individual mandate drives up costs for all.
• The wealthy will keep more millions of dollars that have never been taxed due to further exemptions in the estate tax.
• The Child Tax Credit will be extended to affluent families who do not need assistance, while 86,000 children in working families in Iowa receive a token increase of $75 or less — both expansions to evaporate after 2025.
• Businesses will get enormous, permanent tax breaks with no requirements to create jobs.

Some might recall a longtime radio commentator, Paul Harvey, and his “Rest of the Story” pieces. The points above are the “rest of the story” that you might not hear from backers of the latest tax giveaway in Congress. You might be OK with them and call them the “best of the story.”

Or, you might be concerned about the impact they will have on U.S. and Iowa families, on national debt and new challenges they bring to the safety net, and call them the “worst of the story.”

But they are the real story, and they should not be forgotten as the spin continues.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org

Since 1998 the Iowa Department of Natural Resources has led a volunteer program known as IOWATER to monitor local water quality around the state. Recent state budget cuts have forced the DNR to transfer administration of the program to a patchwork of willing nonprofits and local government agencies.

As reported by Iowa Public Radio, DNR will provide initial training and resources, but local government and nonprofit entities will be responsible for continued funding and administration of any volunteer water quality monitoring efforts.

The outsourcing of IOWATER to local entities is just another example of the Iowa Legislature depending on voluntary action to deal with the statewide water-quality crisis. The state’s Nutrient Reduction Strategy (NRS), which was introduced in 2013, also relies heavily on voluntary conservation measures to address the environmental and health effects of nutrient pollution from both point and nonpoint sources. However, the NRS falls woefully short of reaching its funding targets and desired outcomes.

Our state has failed to appropriately and adequately address the largest source of water quality degradation — agricultural practices that continue pumping nitrogen and phosphorous into our watersheds. More than 90 percent of nitrogen and two-thirds of the phosphorus come from nonpoint sources, almost all agriculture, according to Iowa State University.

As we reported at the Iowa Policy Project in late 2016, “Iowa’s efforts in response to the NRS have had minimal, if any, positive impact on the hypoxic zone in the Gulf of Mexico — or for the most part on Iowa’s lakes, streams, rivers and drinking water supplies. At best, the state of Iowa has managed to not increase levels of nutrients in streams. There remains a widespread lack of understanding and acceptance of the connection between producers’ business practices and the nutrient concentrations in waters of Iowa and the nation.”

Further highlighting the lack of a clear mandate to clean up our waters is the last legislative session, when the Legislature continued 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 from animal facilities, and eliminated scientific research at the Leopold Center. They passed little in new water quality funding, and what funding there was merely diverted resources from other priorities, such as education and public safety. (See our end-of-session statement).

We need to start treating clean water as the valuable public commodity that it is. Water feeds our crops, our pets, our livestock, our sports fish, our children, and our employers and employees. “Water is Life” became a popular mantra for a reason: There is no life without clean water. Clean water requires compulsory and measurable conservation mandates that are enforced and well-funded. The time for voluntary action is over.

Posted by Sarah Garvin, Research Associate for the Iowa Policy Project

sgarvin@iowapolicyproject.org

GUEST BLOG
By Heidi Holliday, Kansas Center for Economic Growth

You’re welcome, America.

Our state, Kansas, just wrapped up a five-year experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program, and virtually everything else that the state funds.

With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the Governor’s plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.

Our state has begun the path to fiscal stability and is closer to becoming a model of good policy choices as much as it is a cautionary tale. The damage done to Kansas from this reckless experiment will not be undone overnight, but other states need not wait to act upon the lessons learned.

Put simply, revenue matters. You can’t get something for nothing. We all want and deserve thriving communities with great schools, parks, and modern roads and bridges; and we chip in to pay for that. That’s what taxes are for.

Because of the scope of the 2012 changes, it didn’t take long before Kansans in every corner of the state began connecting the dots between the actions of state lawmakers and the quickly eroding quality of the things that make for a good economic foundation in every community. With every subsequent shortfall, the picture became more clear.

Meanwhile, the promised economic boom — and the revenue rebound that would supposedly follow — never happened (as economists predicted). In the last few election cycles, voters have viewed candidates and their promises through a different lens, and the 2017 Legislature had the experience and public backing to chart a new course.

Most state tax codes, including ours, need further reform, but it’s high time that state tax policy adhere to one basic, proven (and now proven once again) principle — states need revenue to invest in the things that create thriving communities and a prosperous economy. Kansas just learned this lesson again, the hard way, so that your state doesn’t have to.

You’re welcome.

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The Kansas Center for Economic Growth is part of the State Priorities Partnership (SPP), a nationwide network of policy analysis groups coordinated by the Center on Budget and Policy Priorities. The Iowa Fiscal Partnership — a joint initiative of the Iowa Policy Project and the Child & Family Policy Center — also is a member of SPP.

A memo from the Legislative Services Agency (LSA) indicates a higher-than-anticipated cost of a special-interest sales-tax break primarily for manufacturers.

We could not afford it when Governor Terry Branstad attempted to implement it by rule in 2015, or when a scaled-back version passed in 2016, and we cannot afford it now.

But it appears likely that the new break is at least part of the reason sales-and-use taxes are flattening out, putting fresh pressure on the budget even after FY2017 cuts and continued reliance of state policy makers to push tax breaks that divert millions from critical services such as education.

There is great irony in this report coming as Governor Branstad was turning over the keys to Kim Reynolds, especially given this comment in the LSA piece by senior fiscal legislative analyst Jeff Robinson:

One potential explanation for the recent sales/use tax downturn is an underestimated fiscal impact of the sales/use tax exemption for manufacturing supplies and replacement parts. For proposed legislation in previous years, estimates of the impact of exempting manufacturing supplies and replacement parts from the State sales/use tax had been much higher.

As Robinson suggests, there was ample reason to think the cost would be “much higher” and that should have been taken into account in revenue estimates and crafting the FY17 budget.

Likewise, the four of us were present in the Iowa House chamber in 1983 when new Governor Branstad proposed a sales-tax increase, just a few months after bludgeoning his election opponent, Roxanne Conlin, with a “tax and spend” refrain. The new Governor inherited a budget shortfall right out of the gate, a product of overly rosy revenue projections by the Ray administration.

To be fair to Governor Ray, the farm crisis was unfolding back then, and the landscape was not necessarily as clear.

This time, the continuing revenue problem is due principally to out-of-control tax giveaways, which have accelerated long since Governor Ray left office. Just this one perk for manufacturing was expected to cost $21.3 million from the state budget.* However, the latest LSA analysis suggests, the cost to the state may be two or three times what was expected.

Odd that Governor Branstad, burned so early in his tenure by optimistic revenue estimates, would let this happen to his very own successor as she took office. Maybe he just forgot.

We did not forget.

 

* That cost figure grows to $25.6 million when including the dedicated revenue for local school infrastructure, and $29.2 million when including lost local-option tax revenue.

Posted by IPP Executive Director Mike Owen, IPP Founder David Osterberg, IPP Board President Janet Carl, and IPP Board Member Lyle Krewson. Owen was the Statehouse correspondent for the Quad-City Times and Osterberg, Carl and Krewson were state representatives from Mount Vernon, Grinnell and Urbandale, respectively — in 1983.