SHARE:
Policy Points from Iowa Fiscal Partners

Posts tagged Mike Owen

Veto words ‘ring hollow’

‘Governor Branstad’s words ring hollow in his decisions to cut education funding and to prevent greater access to child care assistance.’

IOWA CITY, Iowa (July 2, 2015) — The Iowa Fiscal Partnership released this statement from Mike Owen, executive director of the nonpartisan Iowa Policy Project, about actions taken late today by Governor Branstad on school funding and legislation that would have expanded eligibility for child care assistance:

 
Governor Branstad’s words ring hollow in his decisions to cut education funding and to prevent greater access to child care assistance.
 
First, the Governor is whacking $55.7 million in one-time funding for local schools and area education agencies from a budget compromise reached over many months by legislators. To defend this and other vetoes, the Governor speaks of concern about across-the-board cuts, when there is no threat of that possibility. These one-time funds for education were designated for one-time uses — in deference to the Governor’s previously stated concerns. The veto leaves schools with only 1.25 percent growth in the cost per pupil for the new fiscal year, well below schools’ actual costs — a legislative decision that will drive up property taxes for many districts. Neither the Governor nor the Legislature can claim accurately that they have provided sufficient funds for Iowa’s public schools, and the conclusion to this question comes 16 months past the legal deadline.
 
Second, low- and moderate-income Iowans face severe “cliff effects” — a sharp loss of resources — when their income rises enough to end their eligibility for child care assistance. A vetoed provision of SF505 would have lessened this effect for an estimated 200 families and nearly 600 children each month. These families, whose incomes are just below 150 percent of the federal poverty level (about $36,400 for a family of four), would have become eligible for child care assistance. This would have been a small but significant first step toward reducing the cliff effect. The Governor talks about increased incomes, but his veto means families will not be able to accept or seek small pay increases if it means they could no longer afford child care. The Governor’s claim that an improvement would “perpetuate” the cliff effect is to totally misunderstand the impact of this important benefit for low-income working families. Child care costs are not going down, and incomes are not rising fast enough for families to recover.
 
These issues are only two pieces of the package of decisions announced at the end of the day by the Governor’s Office. There will be more for Iowans to consider as the Governor’s decisions are reviewed more fully.

 

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. For more on the issues raised in this statement, see the IFP website at www.iowafiscal.org.

Budgeting in the dark

Posted April 13th, 2015 to Blog

April 15 is more than Tax Day. It’s also Budget Day, the date by which Iowa school districts are required to certify and adopt their budget for the year starting July 1.

And that’s important, because Iowa schools consider themselves bound by law.

This stands in stark contrast to the General Assembly. The Legislature and Governor, you see, have not told the school districts yet how much money they will have for this budget that must be set by Wednesday. By law, they’re about 14 months late … and counting.

You read that right. Lawmakers were supposed to tell school districts in February 2014.

If schools were really getting the “first bite at the apple,” as some are so fond of saying, this number would have been set. Instead, schools are left wondering how much of the core of the apple will be left when legislators finally get their act together.

Those first bites are already gone — to backfill property-tax cuts, or to provide giant subsidies to multistate corporations that pay no income taxes to our state, or to let millions slip through corporate tax loopholes while our Legislature looks the other way.

The budget deadline is here, and schools don’t know how much they will be permitted to spend, how much of it will be state aid, or how much to levy in the property tax share of that budget.

How, then, do districts respond?

The safest approach for school districts is to assume the worst. This will differ around the state; for many, it means no increase in state aid or per-pupil budget growth.

Because budgets are a mix of state aid and property tax, and you’re assuming no state aid increase, you’ll be setting a levy at its highest amount. If state aid comes in higher, you will lower your levy to the authorized amount — but your overall budget may still be too low to meet the needs you have identified.

While these little tricks keep your district within the law, they do nothing for the spirit of transparency, to enable everyone to be part of the process.

  • District residents don’t really have a clear picture of what their levy will be, so what can they expect to learn, or say, at the required public hearing?
  • District teachers and board members trying to negotiate contracts in good faith through the winter and early spring have no firm numbers to discuss.
  • District administrators trying to plan for fall classes may not be sure whether they will be able to keep current staff levels, or be able to add staff to meet increases in enrollment, special needs, or demands for achievement in cutting-edge fields of study.

All we know as April 15 approaches is that districts, one way or another, will meet the letter of the law. No thanks to state legislators.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Editor’s Note: Mike Owen has been a member of the West Branch Community School Board since 2006.

Basic RGB


Start with ‘zero’ on credits

Posted March 11th, 2015 to Blog

It was​ fascinating Tuesday to see Iowa lawmakers talking about zero-based budgeting — starting every budget from scratch — when they have refused to do the same with tax credits.

Spending on tax credits — including millions to companies that don’t pay any state income tax — just keeps going on and on.

And on.

And on.

Companies basically get to appropriate state money to themselves. Quite a deal if you can get it.

If the state were to sunset business tax credits, as recommended in 2010 by a special governor-appointed Tax Credit Review Panel, lawmakers could review each one and decide which are actually producing a public benefit, whether any of them are money well spent. If so, they could renew the credit. If not, we could put our resources where they make more sense for all Iowans.

Maybe a part-time legislature could start with a zero base on tax credits before we talk about it for an entire state budget.

Owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

No income taxes, big checks from state

IFP NEWS /
Lucrative program lets big companies erase taxes, and get extra in checks

IOWA CITY, Iowa (Feb. 11, 2015) — More companies are benefiting from a lucrative tax subsidy that permits large, profitable corporations to get checks from the state without paying any Iowa income tax.

The latest annual report from the Department of Revenue on the use of the Research Activities Credit (RAC) shows that 248 companies claimed $51 million from the program in 2014, one-third more than the highest number of companies in the last five years.

Most of the credit claims — $34.8 million, or 68 percent — were paid out as checks, not as tax reductions.

“Most notable is that Iowa continues to give a lot of money to companies that aren’t paying income tax. There were 181 companies that received RAC checks from the state because their tax credits exceeded their income tax liability,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project in Iowa City, part of the Iowa Fiscal Partnership.

“The $35 million that went to those 181 companies could have provided 1 percent supplemental state aid for public schools, or it could have gone to other public services, if it had been part of budget discussions. But the state does this kind of spending outside the budget process.”

The report, released Wednesday, also shows:
— Only 16 companies — or 6.5 percent — claimed 83 percent of the benefits and at least 75 percent of the checks.
— Those 16 companies each had at least $500,000 in claims, totaling over $42 million in 2014.
— The top five companies benefiting from the credit have been the largest beneficiaries over the last five years: Rockwell Collins, Deere & Co., Dupont, John Deere Construction and Monsanto.

“Those are highly profitable companies. We need to be asking whether it makes sense, when school budgets are tight and enforcement of environmental and workplace laws are weak, to be subsidizing these businesses to do research that they already would have to do, and can afford to do on their own,” Owen said.

Owen noted a special tax credit review panel appointed in 2009 came back in 2010 with many recommendations to curtail spending on business tax credits — including elimination of the so-called “refunds” of the research credit.

Rockwell Collins was the biggest corporate beneficiary in 2014, with $11.7 million in claims, followed by Deere at $9.4 million and Dupont at almost $6.9 million.

“Careful analysis of the report shows that at least two of the top three companies received at least some of their benefits without paying any income tax,” Owen said.

“Unfortunately, the good information in this report doesn’t go far enough to provide detail for Iowa taxpayers on how their money is being spent on this credit. If it did, we would know exactly how much was paid to these big companies as checks, and how much was used to erase taxes they owe.”

The report is available on the Iowa Department of Revenue website at https://tax.iowa.gov/report/Reports?combine=Research%20Activities.

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

Table1a504Table3a504

Editor’s Note: This release was revised on Thursday, Feb. 12, to clarify that the top 16 claimants received 83 percent of the total benefits and at least 75 percent of the benefits that were paid as checks. The original Feb. 11 release stated that those firms had 75 percent of the benefits.

See ya later, Gator: Civics lesson from bowl game

Posted December 31st, 2014 to Blog

ipp-kinnick6Of course we’re all excited that the Iowa Hawkeyes will be playing Jan. 2 against Tennessee in the — uh, what’s the name of that bowl again?

It has something to do with tax preparation. (No royalties are being paid for publication of this message, so no need to repeat it.) So for now, let’s just call it the Pay Your Taxes Bowl.

Or, to recognize what we do by preparing and paying our taxes, we could make it the Feed the Hungry Bowl, the Educate the Children Bowl, the Fix the Highways Bowl, or the Clean the Air and Water Bowl.

In years past, most bowl games promoted a tradition, or an image, related to their locale. This game in Jacksonville, Florida, used to be called the Gator Bowl, and that was the name of the stadium. Now it’s played in a rebuilt stadium named for a bank.

The Gator Bowl has a storied past, including a good game in 1983 between the Iowa Hawkeyes and the Florida Gators, who won 14-6.

Even the Beatles played there once — though it was for a concert, not a gridiron battle with the Beach Boys — and that seems more interesting than the heavy-handed advertising that dominates these games now. Maybe the Fab Four Bowl? Strawberry Fields Bowl? Hold Your Hand Bowl?

There was a time when the Orange Bowl wasn’t connected to the name of a delivery service or a credit card company. There was a Citrus Bowl in Florida and a Peach Bowl in Georgia. I remember going to the Alamo Bowl once, happy to see the name bound to the enduring history of San Antonio, with no connection to rental cars.

Almost all bowls now feature a corporate sponsor’s name, so it may be in the nature of things that when many Iowa fans remember “The Catch” by Warren Holloway to beat LSU as the clock expired, they involuntarily associate it with the name of a credit card.

Still, we should acknowledge the irony that with the corporatization of all that is good, like football bowl games, at least one bowl game is associated with paying taxes instead of avoiding them.

Just understand: Some of us will still think of it as the Gator Bowl.

Go Hawks!

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Editor’s Note: This piece was published as an Iowa View in the Dec. 28, 2014, Des Moines Register


Leveling the playing field

Posted December 11th, 2014 to Blog

Small business owners get it: They follow the rules, but preferential treatment for giant companies puts them at a disadvantage.

Case in point: Lora Fraracci, who had an excellent guest opinion in today’s Cedar Rapids Gazette about practices big companies use to avoid paying U.S. taxes. The problem is not exclusively an issue with the lax U.S. tax code. It is a big problem at the state level as well.

Ms. Fraracci runs a residential and commercial cleaning business. As she noted:

“As a small-business owner in Des Moines, I play by the rules and pay my taxes to support our American economy. I create jobs that will continue to support our local economy. When the playing field is so uneven it makes it hard to realize this dream.”

The issue has been receiving some national attention, but many may not realize the prevalence of this problem and its extension to state taxes. While Ms. Fraracci and other small businesses, or Iowa focused businesses, follow the rules, large companies they may serve can find a way to either (1) avoid the rules, or (2) block stronger rules.

The Iowa Fiscal Partnership has written about these issues for some time, and the reports are on our website.

The biggest Iowa breaks come in two ways: tax loopholes and tax credits.

Tax loopholes have been estimated to cost the state between $60 million and $100 million a year. Loosely written law is an invitation to big companies’ lawyers and accountants to find ways to lower their firms’ taxes. Multistate firms can shift profits to tax-haven states and avoid taxes they otherwise would be paying in Iowa. That creates the uneven playing field Ms. Fraracci sees.

Iowa could fix this by adopting something called “combined reporting,” which the business lobby has fought tooth and nail when proposed in the past by Governors Tom Vilsack and Chet Culver. Many states — including almost all our neighbors (Illinois, Wisconsin, Minnesota, Kansas and Nebraska) — already do this. See our 2007 report, which remains relevant because Iowa has refused to act.

Tax credits are particularly costly, rarely reviewed with any sense that they will be reformed. This is illustrated best with the Research Activities Credit, which provides a refundable credit to big companies to do something they are likely to anyway: research to keep their businesses relevant and competitive.

In 2013, that credit cost $53 million, with $36 million of that going to companies that paid no state income tax in Iowa. The default position must be that this is wasted money, because it is never reviewed in the regular budget process the way other spending is examined every year — on schools, law enforcement, worker protection and environmental quality. In Iowa, spending on tax credits is spending on autopilot.

Read here about Iowa’s accountability gap on tax-credit spending.

Looking ahead, as a new legislative session approaches and we hear repeatedly that things are tight, keep these points in mind to better understand the real fiscal picture facing Iowa. The more small-business owners understand this, the more likely pressure can build for real reform.

Owen-2013-57  Posted by Mike Owen, Executive Director, Iowa Policy Project


Job 1 for Day 1 — putting Iowa families first

Posted November 6th, 2014 to Blog

As election dust settles, priorities remain clear for Iowa families

Now that the votes are counted, the real work begins. Job 1? It could be any of a number of areas where solid research and analysis have shown better public policy could make a difference for a more prosperous, healthier Iowa. Take a step back from the TV ads and “gotcha” politics and these issues come clearly in focus.

In Iowa, research shows solid approaches to economic prosperity for working families include:

In Iowa, research shows a fiscally responsible approach to both find revenues and do better with what we have includes:

  • Stopping tax giveaways to companies that pay no income tax — which occurs at a cost of between $32 million and $45 million a year through one research subsidy program alone, even though there is nothing to show this spending boosts the Iowa economy or produces activity that would not occur anyway. http://www.iowafiscal.org/big-money-big-companies-whose-benefit/
  • Reining in unnecessary “tax expenditures” — tax breaks, tax credits and other spending done through the tax code — could bring in tens or hundreds of millions of dollars for public services. A five-year sunset on all tax credits would force lawmakers to review and formally pass renewals of this kind of spending, now on autopilot. The last attempt at real reform fell woefully short. http://www.iowafiscal.org/tax-credit-reform-glass-half-full-maybe-some-moisture/
  • Plugging tax loopholes — a $60 to $100 million problem — would pay for a 2 or 3 percent annual increase in state per-pupil funding of K-12 schools. Twenty-three states, including 4 of 6 Iowa neighbors, don’t permit multistate corporations to shift profits out of state to avoid Iowa income tax and contribute their fair share to local education and other state services. http://iowapolicypoints.org/2013/05/22/will-outrage-translate-into-policy/
  • Reforming TIF — tax-increment financing, which is overused and often abused by cities around the state, has caught lawmakers’ attention in the past and should again. Like many tools that provide subsidies to private companies and developers, it should be redesigned to assure subsidies only go to projects with a public benefit and only where the project could not otherwise occur. Further, it should be designed to assure that only the taxpayers who benefit are the ones footing the bill, which is a problem with current TIF practice. http://www.iowafiscal.org/category/research/taxes/tax-increment-financing-tif/

In Iowa, research shows a healthy environment and smart energy choices for Iowa’s future includes:

  • Putting teeth into pollution law — which means reforms in Iowa’s Nutrient Reduction Strategy to eliminate pollution in waterways. http://www.iowapolicyproject.org/2014Research/140717-nutrient.html
  • Allowing local government to regulate frac sand mining — When it comes to cigarettes, guns and large hog facilities the Iowa Legislature took away the right of local government to listen to citizen desires. The General Assembly and the Governor should let democracy thrive and not take away local control of sand mining.
  • Encouraging more use of solar electricity in Iowa — Jobs are created while we confront climate change if we build better solar policy in Iowa. http://www.iowapolicyproject.org/110325-solar-release.html
  • Promoting local food and good food choices with school gardens — and a pilot project to offer stipends to Iowa school districts could encourage both learning and better nutrition. http://www.iowapolicyproject.org/2014Research/140514-school_gardens.html

None of these issues are new and it’s not an exhaustive list. But these were big issues for our state before the election and remain so, no matter who is in charge.

Together, we can build on the solid research cited above and lay the foundation for better public policy to support those priorities.

Owen-2013-57   Posted by Mike Owen, Executive Director of the Iowa Policy Project


Food insecurity: 1 in 9 Iowa households

Better in Iowa than U.S. average — but worse for Iowans over the decade

140904-IFP-foodinsec-boxIowa households fared better than the national average on food insecurity in 2011-13, but worse than Iowans did a decade earlier, according to the U.S. Department of Agriculture.

In its annual report on food insecurity, USDA reported the prevalence of food insecurity in Iowa at 11.9 percent in those years, compared to a national average of 14.6 percent.

In addition, 4.4 percent of Iowans experienced “very low food security” — households that cited several food-insecure characteristics and disruption in eating patterns because of a lack of money or other resources.

The nonpartisan Iowa Fiscal Partnership (IFP) noted that in both cases, Iowans were doing much better on the food security scales in 2001-03 than in the latest period examined.

“While Iowans’ very low food security was lower than the national average of 5.7 percent, it was almost 50 percent higher than it had been only a decade before,” said Mike Owen, executive director of the Iowa Policy Project, part of IFP. Owen noted that level had risen from a 3.0 percent average for 2001-03 to 4.4 percent in 2011-13.

Charles Bruner, executive director of the Child & Family Policy Center, also part of IFP, pointed to the overall food insecurity change, from 9.5 percent in 2001-03, to 12.1 percent in 2008-10, to 11.9 percent in the latest period examined.

“Statistically, food insecurity in Iowa has been fairly level for recent years, but these are Iowans — including kids and seniors, not statistics — and the comparison over the decade is disturbing,” Bruner said. “This makes it more important to assure that the Supplemental Nutrition Assistance Program (SNAP) is maintained, that eligibility standards are not weakened, and that access is assured to all who need the help.”

For both food insecurity and very low food security, USDA reported the small Iowa improvements from 2008-10 to 2011-13 to be statistically insignificant. According to the USDA, taking into account margins of error for the state and U.S. estimates, eight states had statistically significant higher levels of food insecurity than the national average of 14.6 percent in 2011-13.

Iowa was among 14 states with a statistically significant lower level of food insecurity than the national average. In addition, the Iowa level of very low food security was statistically lower than the national average, as was the case in 12 other states.

 The Iowa Fiscal Partnership is a joint public policy analysis initiative of two Iowa-based, nonpartisan, nonprofit organizations — the Iowa Policy Project (IPP) in Iowa City and the Child & Family Policy Center (CFPC) in Des Moines. For IFP reports, go to http://www.iowafiscal.org. For information about how to make tax-deductible contributions to IPP or CFPC, visit their websites: http://www.iowapolicyproject.org and http://www.cfpciowa.org, respectively.

#     #     #     #     #

* Alisha Coleman-Jensen, Christian Gregory and Anita Singh, “Household Food Security in the United States in 2013,” U.S. Department of Agriculture.

 

Beware the “business climateers”

Posted August 18th, 2014 to Blog

Fisher-GradingPlacesIowa’s business lobby appears to be preparing a new assault on the ability of our state to provide public services.

It would be the latest in a long campaign, in which lobbyists target one tax at a time under a general — and inaccurate — message about taxes that we will not repeat here.

Suffice to say, Iowa taxes on business are low already. Many breaks provided to businesses are rarely reviewed in any meaningful way to make sure that taxpayers are getting value for those dollars spent, ostensibly, to encourage economic growth. Rarely can success be demonstrated.

The Iowa Taxpayers Association is holding a “policy summit” this week and promoting a new report by the Tax Foundation to recycle old arguments that are no better now than they have been for the last decade.

Fortunately in Iowa, we know where to turn to understand claims from the Tax Foundation, and that resource is Peter Fisher, our research director at the Iowa Policy Project. Fisher has written two books on the so-called “business climate” rankings by the Tax Foundation and others, and is a widely acknowledged authority on the faults in various measures of supposed “business climates” in the states.

Fisher, in this guest opinion in the Cedar Rapids Gazette, noted weaknesses in the Tax Foundation’s claims, not the least of which is that the anti-tax messages are not supported by the foundation’s own report. Fisher notes this about the Tax Foundation’s “State Business Tax Climate Index”:

It is a mish-mash of 118 tax features … weighted arbitrarily and combined into a single number for the index.

This number has no real meaning. It produces wacky results because it gives great weight to some minor tax features (such as the number of tax brackets) while leaving out completely two things that have a huge impact on corporate income taxes in Iowa: single sales factor, and federal deductibility.

This past spring, this Iowa Fiscal Partnership two-pager noted:

A variety of factors influence the decisions businesses make about whether they want to locate or expand within a given state. These factors include available infrastructure, the proximity to materials and customers, the skill of its workforce, and whether the state has good schools, roads, hospitals, and public safety. As we have shown elsewhere, state taxes play at best a minor role.

In Iowa, we constantly hear the same old argument … used to enact large tax cuts for commercial and industrial property this past year and continues to be an excuse used to justify giving away large tax credits to businesses throughout the state.

But this argument just isn’t true…

Whether we are looking at the entire range of taxes that fall on businesses or just the corporate income tax, the fact is that business taxes in Iowa are low.

Only if Iowa policy makers and the public ignore the reality on Iowa business taxes will these special interests get their way again.

Owen-2013-57 Posted by Mike Owen, Executive Director of the Iowa Policy Project

*View Peter Fisher’s reports for Good Jobs First on business climate rankings:

 


Policy choices are about quality, not quantity

Posted May 28th, 2014 to Blog

The headline on my doorstep today says, “Legislature continues trend of passing fewer bills.” That lead story in the Cedar Rapids Gazette notes that for the fourth straight year, a divided Iowa Legislature has passed fewer than 150 pieces of legislation.

Ah, numbers. Can’t live with ’em. Can’t live without ’em. But in this case, they don’t make a lot of difference.

What matters are the words and the policies embodied in those 150 or fewer bills. It’s about quality, not quantity.

What have those bills included in recent years? Here are some key points:

  • A commercial property tax overhaul that is tainted by big benefits to huge out-of-state retailers that need no help and pay too little in Iowa tax as it is.
  • An expanded Earned Income Tax Credit that improves tax fairness for low- and moderate-income working families across Iowa.
  • Funding to assure a tuition freeze remains for a second year in regents institutions.
  • A small boost in child care assistance for working students, making them eligible for the benefit so they can get skills for better paying jobs to sustain their families.

What have those bills not included in recent years? Here are some noteworthy omissions:

  • No overhaul of the personal income-tax system to better balance tax responsibilities for all taxpayers regardless of income, or to assure revenues are kept adequate to meet costs of critical services.
  • No greater accountability on spending that is done through the corporate tax code, outside the budget process.
  • No increase in the minimum wage, stagnant at $7.25 for over six years now.
  • No broad expansion of child care access for struggling families who don’t make enough to cover costs, but make too much to receive assistance.
  • No move to battle wage theft, which we have estimated to be a $600 million annual problem in Iowa’s economy — not including the $60 million lost in uncollected taxes and unemployment insurance.
  • No long-term answers for funding of education at all levels, violating the promise of law for K-12 schools, and leaving a legacy of debt for many college students and their families.

Those are not exhaustive lists, but a statement of priorities established by agreement, stalemate or inertia. We covered some of these points in our end of session statement. Some will like the overall product of recent years, some will not. Few will ask how many bills were passed.

At least one theme weaved by this record cannot be disputed: Iowa is on record that we will not ask the wealthy and well-connected to do more. We pretend more often than not that we can meet our obligations to the citizens of Iowa without investing in the public services they require, that if we just keep cutting taxes all will be well. Every now and then we’ll say something about opportunity for all and mean it, but we’re not ready to make that a long-term commitment.

Sometimes, not passing something says as much about legislative priorities as passing it.

Owen-2013-57   Posted by Mike Owen, Executive Director