Iowa Fiscal Partnership / Iowa Policy Project
SHARE:
Policy Points from Iowa Fiscal Partners

Posts tagged Iowa Policy Project

Accountability is good for tax breaks, too

Posted January 4th, 2013 to Blog
Mike Owen

Mike Owen

The Des Moines Register has an interesting editorial today about the state’s voluntary preschool program. The Register is asking for accountability:

“Before lawmakers consider any new education reforms, they should ensure that the changes they made a few years ago are helping.”

Hard for anyone to argue with that. Advocates of preschool surely would not fear a legitimate review. And what better time to review and adjust a program than its early years?

Now, wouldn’t it be interesting to see the same concept applied to Iowa’s many tax breaks for corporations? Do they do any good? There is no evidence that they do for the most part, a fact ignored routinely by the Iowa General Assembly and our Governors past and present, but they just keep on going. The idea of a review of tax breaks only gets lip service from most lawmakers; there are no serious reviews and no teeth in state law to require them.

The Research Activities Credit alone is a program crying out for this kind of scrutiny, a point clear from the few details that are available (See http://www.iowafiscal.org/2012research/120221-IFP-RAC.html). Unlike the preschool program, in which 9 out of 10 Iowa school districts participate, the RAC is used by a relative handful of companies in Iowa, well under 200, and is dominated by less than 10.

The money is not all that different: $58 million in 2011-12 for preschool through the state formula vs. almost $48 million for the RAC in 2011 — with $45 million of that paid in “refund checks.” These are not refunds of taxes paid, and they don’t even reduce taxes. Instead, millions go to big corporations such as Rockwell Collins, Deere and DuPont that owe so little in income tax that their tax credits are far above the amount of taxes they owe.

What’s good for the goose of preschool is certainly good for the gander of tax breaks.

//EDITOR’S NOTE: The next annual report on the use of the Research Activities Credit is due Feb. 15 from the Iowa Department of Revenue. Stay tuned!//

Posted by Mike Owen, Assistant Director


Remaking ‘Blazing Saddles’

Posted December 13th, 2012 to Blog
Peter Fisher

Peter Fisher

Some of the arguments against raising tax rates on the richest 2 percent of Americans back to the level that prevailed during the boom years of the 1990s bring to mind Mel Brooks’ classic, Blazing Saddles. In the film, new Sheriff Bart is surrounded by an angry mob. He draws his gun, points it at his own head and warns he’ll shoot if someone makes a move. The mob freezes and Bart escapes to safety.

In the current remake of the film, Bart is being played by the wealthy businessmen claiming they will have to lay off workers if we raise the tax rate on their profits by 3.6 percentage points.

We can reasonably assume those workers are currently productive, earning enough for the owner to cover their wages and add something to the bottom line. If not, they would have been laid off long ago. So these owners would have us believe that an increase in the tax on profits would lead them to lay off these productive workers. That, in turn, would mean the business is producing less, earning less profit before taxes.

So the owners are actually saying, “If you raise my taxes, I will show you a thing or two — I’ll deliberately sabotage my business so you have less profit to tax.”

A business owner whose objective is to maximize after-tax profits will always be better off producing more, with more workers, and earning more before-tax profit, no matter what percent of those profits end up going to pay income taxes. On the other hand, making a political point may be so important to these owners that they are willing to shoot themselves in the foot, if not the head, to do it. If they are rich enough to afford that symbolic gesture, I guess we can’t stop them.

Fortunately, in the remake of Blazing Saddles, it appears that the angry mob is ready to call their bluff. They recognize that the “job-killing tax increase” is no such thing. It is simply an effort to reclaim for the average American a share of the increased wealth generated by workers in this economy in recent years that has been captured almost entirely by the richest among us.

Posted by Peter Fisher, Research Director


Remaking ‘Blazing Saddles’

Posted December 13th, 2012 to Blog
Peter Fisher

Peter Fisher

Some of the arguments against raising tax rates on the richest 2 percent of Americans back to the level that prevailed during the boom years of the 1990s bring to mind Mel Brooks’ classic, Blazing Saddles. In the film, new Sheriff Bart is surrounded by an angry mob. He draws his gun, points it at his own head and warns he’ll shoot if someone makes a move. The mob freezes and Bart escapes to safety.

In the current remake of the film, Bart is being played by the wealthy businessmen claiming they will have to lay off workers if we raise the tax rate on their profits by 3.6 percentage points.

We can reasonably assume those workers are currently productive, earning enough for the owner to cover their wages and add something to the bottom line. If not, they would have been laid off long ago. So these owners would have us believe that an increase in the tax on profits would lead them to lay off these productive workers. That, in turn, would mean the business is producing less, earning less profit before taxes.

So the owners are actually saying, “If you raise my taxes, I will show you a thing or two — I’ll deliberately sabotage my business so you have less profit to tax.”

A business owner whose objective is to maximize after-tax profits will always be better off producing more, with more workers, and earning more before-tax profit, no matter what percent of those profits end up going to pay income taxes. On the other hand, making a political point may be so important to these owners that they are willing to shoot themselves in the foot, if not the head, to do it. If they are rich enough to afford that symbolic gesture, I guess we can’t stop them.

Fortunately, in the remake of Blazing Saddles, it appears that the angry mob is ready to call their bluff. They recognize that the “job-killing tax increase” is no such thing. It is simply an effort to reclaim for the average American a share of the increased wealth generated by workers in this economy in recent years that has been captured almost entirely by the richest among us.

Posted by Peter Fisher, Research Director


States should beware ALEC-brand snake oil

Posted November 29th, 2012 to Blog

Peter Fisher

Legislative sessions will be starting across the country after the first of the year, and with them, some very bad ideas for public policy.

The purveyor of many poor prescriptions is a very influential right-wing organization, the American Legislative Exchange Council, known as ALEC. The organization promotes policies to cut taxes and regulations in the disguise of promoting economic growth, but what they really do is reduce services, opportunity and accountability.

In short, the ALEC medicine show is a prescription for poor results, and states should beware.

Our new report, “Selling Snake Oil to the States,” examines ALEC’s proposals and the misinformed, primitive methodology behind the study that supports them. The new report, a joint project of the Iowa Policy Project in Iowa City and Good Jobs First in Washington, D.C., illustrates how ALEC’s prescriptions really offer stagnation and wage suppression.

In fact, we find that since ALEC first published its annual “Rich States, Poor States” study with its Economic Outlook Ranking in 2007, states that were rated better have actually done worse economically.

Find “Selling Snake Oil to the States” at http://www.goodjobsfirst.org/snakeoiltothestates.

We tested ALEC’s claims against actual economic results. We conclude that eliminating progressive taxes, suppressing wages, and cutting public services are actually a recipe for economic inequality, declining incomes, and undermining public infrastructure and education that really matter for long-term economic growth.

ALEC’s rankings are based on arguments and evidence that range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research.

What we know from research is that the composition of a state’s economy — whether it has disproportionate shares of high-growth or low-growth industries — is a far better predictor of a state’s relative success over the past five years. Public policy makers need to stick to the basics and recognize that public services that benefit all employers.

Posted by Peter Fisher, Research Director


IFP News: Selling Snake Oil to the States

IPP-Good Jobs First Study:

ALEC’s Advice to States on Jobs Is Actually a Recipe for Stagnation and Wage Suppression

View report (PDF) from Iowa Policy Project/Iowa Fiscal Partnership and Good Jobs First
Download this news release (2-page PDF)

snakeoiltothestates-3inWashington, D.C. (Nov. 28, 2012) — A new study finds that state tax and regulatory policies recommended by the American Legislative Exchange Council (ALEC) fail to promote stronger job creation or income growth, and actually predict a worse performance.

Since ALEC first published its annual Rich States, Poor States study with its Economic Outlook Ranking in 2007, states that were rated better have actually done worse economically.

Those are the key findings of “Selling Snake Oil to the States,” a study published today by Good Jobs First and the Iowa Policy Project and freely available online at http://www.goodjobsfirst.org/snakeoiltothestates. It was released at a press conference the same week ALEC holds its annual fall meeting in Washington, D.C.

“We tested ALEC’s claims against actual economic results,” said Dr. Peter Fisher, research director of the Iowa Policy Project and primary author of the study. “We conclude that eliminating progressive taxes, suppressing wages, and cutting public services are actually a recipe for economic inequality, declining incomes, and undermining public infrastructure and education that really matter for long-term economic growth.”

The study dissects the methodology used by ALEC’s lead author Arthur Laffer and his co-authors. It finds that their arguments and evidence range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research. Instead, Laffer et al repeatedly engage in methodologically primitive approaches such as two-factor correlations and comparing arbitrary small numbers of states instead of all 50.

The study finds that the composition of a state’s economy — whether it has disproportionate shares of high-growth or low-growth industries — was a far better predictor of a state’s relative success over the past five years.

“State corporate income taxes average less than one-fifth of 1 percent of the average company’s costs,” said Fisher. “The ALEC/Laffer studies would have state leaders ignore site-location basics and disinvest public goods that benefit all employers.”

Good Jobs First is a nonprofit, nonpartisan resource promoting accountability in economic development and smart growth for working families. It was founded in 1998 and is based in Washington, D.C.

The Iowa Policy Project is a nonpartisan, nonprofit organization promoting public policy that fosters economic opportunity while safeguarding the health and well-being of Iowa’s people and environment. It was formed in 2001 and is based in Iowa City.

A full table

Posted November 21st, 2012 to Blog
Mike Owen

Mike Owen

As the serving table groans and the plate runneth over for many Americans on Thanksgiving Day, the bounty of food they enjoy will not be so plentiful for all.

Many Iowans will face a challenge — as they often have — just to be able to provide enough for their family. They will be thankful that our nation does set aside enough to help them get by. It’s nothing extravagant, but it matters in keeping their children and themselves fed when times are tough. It comes in the form of what we have long known as “Food Stamps,” one of the most successful programs ever initiated by the federal government.

Against this backdrop, Congress holds the fate of the Farm Bill, legislation passed every five years. Three-fourths of the package is related to nutrition support, including Food Stamps — now SNAP, the Supplemental Nutrition Assistance Program. The outcome, as outlined by Michael Bruner in a recent brief for the Iowa Fiscal Partnership, Children and the Farm Bill, shows that decisions in the lame-duck session will have important implications for how well SNAP continues to meet the needs of struggling Americans.

Gridlock in Washington over the past year has left this issue hanging. As IPP’s Andrew Cannon noted a year ago in his report on public and private nutrition programs, A Secure Nutrition Network, “Even a robust private network of food banks and food pantries cannot fully cover the needs of food insecure Americans if federal nutrition programs lapse.”

As we celebrate the holidays and prepare for the year ahead, we should note that over 197,000 households in Iowa, representing over 419,000 people, received food assistance benefits in October totaling about $51 million. Is $51 million a lot of money? Yes — and it’s going into local economies across the state, while providing important help to families.

But there’s no one living extravagantly off that assistance. It works out to about $121 a month per person — about $3.89 per day, or $1.30 per meal. It is, as advertised, a “supplemental” benefit for, in many cases, working families.

The table is full of important issues, none more important than assuring that all Americans, particularly children, have enough to eat.

Posted by Mike Owen, Assistant Director

———

Other resources on this issue:

Check out the “Policy Basics” brief from the Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=2226 and the latest food security report from USDA: http://www.ers.usda.gov/publications/err-economic-research-report/err141.aspx


Talk is cheap

Posted November 20th, 2012 to Blog
David Osterberg

David Osterberg

There are three principal problems with the Governor’s proposed Nutrient Reduction Strategy, and they can be summed up in three words: Talk is cheap.

Solutions to this problem start with enforcement, and that takes money. The state of Iowa shortchanges water quality, underfunding it even compared to what we did a decade ago. Our March 2012 report, Drops in the Bucket: The Erosion of Iowa Water Quality Funding, found that this water-quality funding decline came despite greater needs for water protection and public willingness to fund it.

Second, inadequate enforcement of environmental rules for Iowa’s livestock industry has resulted in the state’s censure by the U.S. Environmental Protection Agency, and this threatens our ability to write permits and otherwise enforce our obligations under the Clean Water Act. The strategy bases enforcement on voluntary acceptance of state rules. This has not worked.

Finally, it says much about Iowa’s commitment to water quality — or lack of commitment — when the state proposes a major nutrient reduction strategy and offers no new money to get the job done. The strategy proposes nothing to make sure Iowa does better in assuring clean water for its residents, for states downstream, and the future.

In short, we need a strategy that recognizes the serious water quality problem we have and offers a realistic approach to addressing it. This must be more than a goal — but a guarantee to all Iowans.

Posted by David Osterberg, Executive Director


Does Iowa have the will to govern itself?

Posted November 13th, 2012 to Blog

Does Iowa have the will to govern itself?

How ironic that we have reason to ask that question, a week after a presidential election that capped three-plus years of courting of Iowa voters, and a few days before a potential 2016 candidate visits to start all of it brewing again.

Yet the question is unavoidable. Consider two pieces in today’s Des Moines Register.

First, the Register reports, the federal Environmental Protection Agency may take over water quality enforcement in Iowa due to weak efforts by Iowa’s state Department of Natural Resources (DNR).

As IPP’s David Osterberg recently told EPA officials to hold DNR more accountable because the state is underfunding water protection.

“EPA should help the agency in bargaining with a legislature that has shown itself to be less concerned with water quality protection than tax cuts. … There is no question that if EPA simply accepts the agency’s agreement to try to do better, water quality will not improve in this state.”

If the EPA admonishment of Iowa’s lax environmental enforcement were not enough, we also are waiting for the state to offer its long-overdue decision on how to proceed on health reform. The 2012 election affirms the Affordable Care Act will not be repealed, so the state’s dragging its heels on creating a health insurance exchange no longer makes sense — if it ever did.

Yet, we now have a real question of whether it’s a good idea for the state to move ahead on its own with an exchange, where Iowans can shop for affordable insurance and not be denied coverage, or having the federal government do it for us. As the Register opined in an editorial today, “It is too important for this state to mess up.” Citing problems implementing temporary high-risk pools, and political dealings in previous legislative attempts to create an exchange, the Register noted:

“Iowans need the coming insurance marketplace to work for them in years to come. But state leaders have shown they are not the ones to design it.”

Can we govern ourselves? Apparently national candidates will come calling in Iowa without worrying about that. So maybe we should answer if for ourselves.

Posted by Mike Owen, Assistant Director


How about that timing of worker pay report?

Posted October 31st, 2012 to Blog
Mike Owen

Mike Owen

Timing is everything.

Consider the announcement Tuesday by the Branstad administration of a new report produced by an outside company to examine whether Iowa state workers are paid too much.

Paid too much?

As the Department of Administrative Services was releasing the report, emergency rescue workers across the Eastern seaboard were putting themselves in harm’s way to help their neighbors in the path of the deadly Hurricane Sandy. And right here in Iowa, within a couple hours of the DAS news conference, bank robbers shot two law enforcement officers — critically wounding the Sumner police chief and injuring a state trooper.

We count on public servants every day, sometimes when lives are at stake, sometimes in enriching life with education, sometimes in just keeping life orderly enough that we can enjoy it without worrying whether the water or food will poison us, or that our job will not put us in danger we did not sign up for.

Oh, and the report? It found that pay scales for Iowa state workers are generally competitive. Where the report cited potential problems, the information provided was too sketchy to delve in and really go through it. And, being produced by a private company that copyrighted the report, we might just never know what our tax dollars produced. This is what happens with privatization, folks. But if you want a quick look at the holes in the report, see the review Tuesday by IPP’s Peter Fisher.

So, for those less inclined toward knee-jerk appeals against public workers, the timing of this report, you might say, wasn’t too bad.

Posted by Mike Owen, Assistant Director

 

Problems with new state pay study

Posted October 30th, 2012 to Blog
Peter Fisher

Peter Fisher

The contracted study of state employee compensation released today by the Iowa Department of Administrative Services is raising questions — including from those of us at the Iowa Policy Project who have been watching this issue for some time.

Many will recall our groundbreaking report from February 2011, Apples to Apples: Private-Sector and Public-Sector Compensation in Iowa, broke down myths about public-sector pay and benefits. In short, we found that even when often more-generous health benefits packages are considered, total compensation for public-sector (state and local government) employees in Iowa is less than that for private-sector employees who have similar education.

Briefly, we would raise these points about the study released today:

  • First, you lose an apples-to-apples comparison when you compare a mean, or average, with a median. Yet that is what this study does, comparing an average or mean base salary in state government with the median pay in the “market.” Income and wages are usually distributed in such a way that the mean is higher than the median. There is not enough information provided to show those distributions in this study, but the danger is that it creates a built-in bias to make the public-sector wages appear higher than the market. (Suppose seven workers earn $40,000 and three earn $60,000, in both the public and the private sector. The average is $46,000, the median is $40,000 — a wide disparity.)
  • The study compares base pay (without benefits) in Iowa state government, with pay for supposedly similar jobs in “the market,” which means both the private sector and other state governments. For about half the job titles, there is no data for other states, so half the comparisons are with public and private jobs together (weighted or averaged in some unknown fashion), the other half just with the private sector.
  • No numbers are given for how many persons fill each job category, so it is difficult to assess the practical implications for the state budget to say 11 positions paid more than the market and seven paid less. Presumably there are many more nurse clinicians (paid below the market) than there are health facilities surveyors (paid above market). They do not explain the derivation of the oft-cited number that overall Iowa base pay is 17.9 percent above market — did they just average all the job titles or did they take into account the number of persons with each job title?
  • The full report does compare Iowa pay with pay for the same job titles in other states — but does not tell us the comparison group. We believe any study should compare states in close proximity; we do not really compete for state employees in most job classifications with Vermont, California, Florida or Mississippi. Most importantly, the results here are simply not believable. They find actual base pay to be well above what other states are paying, often 30 percent to 50 percent more. How did this happen for years and years without anyone noticing, including the state negotiators who presumably were concerned with comparability? These results are not credible, and once again, they compare an Iowa mean with a market median.
  • The report shows the job title for the positions in Iowa, but does not show what the corresponding private-sector job titles were. The devil is in the details here, and the results depend crucially on how they selected private-market analogues to public sector jobs. What private-sector job is comparable to a corrections officer, a special agent, a state trooper, an income maintenance worker, or a child support recovery officer?

Today’s report does nothing to dissuade us from our earlier conclusions, but we do have more questions, because we all can learn from more information where it is available. The problem with the study released today by the state is that it throws out a lot of numbers, but really not a lot of information to enlighten how the company that produced it came up with those numbers.

Posted by Peter S. Fisher, Research Director


Tags: , , ,
Comments: Comments Off on Problems with new state pay study