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Iowa Cannot Afford Another Wasteful Business Tax Break

Posted October 13th, 2015 to Blog

2010-PFw5464Statement by Peter Fisher, Research Director, The Iowa Policy Project, before the Administrative Rules Review Committee

October 13, 2015

The administration’s proposal to create new sales tax exemptions for Iowa businesses is unnecessary, expensive and counterproductive. The state can ill afford another tax break that will harm essential state services while producing little or no economic benefit.

Iowa business taxes are already quite competitive

  • The most recent study of state and local taxes on business as a percent of state GDP by Ernst and Young and the Council on State Taxation shows that Iowa taxes business at 4.7 percent of GDP, exactly the same as the national average. Iowa ranks right in the middle of the pack.
  • A study by Anderson Economic Group in 2015 calculated state and local taxes on business as a percent of pre-tax profits and found Iowa’s effective tax rate to be 8.7 percent, which placed it 32nd among the states, below the national average.

State and local taxes have little effect on business location decisions

  • State and local taxes are less than two percent of total costs for the average corporation. As a result, even large cuts in state taxes are unlikely to have an effect on the investment and location decisions of businesses, which are driven by more significant factors such as labor, transportation, and energy costs, and access to markets and suppliers.

Enacting a subsidy through administrative rules guarantees complete absence of evaluation and accountability

  • While the sales tax break has been promoted as an economic development incentive, creating it by administrative rule eliminates even the minimal level of accountability established by the Legislature for the periodic review of tax credits. There will be no review, no evaluation of its effectiveness, not even an annual accounting of its cost.

Tax breaks erode support for public investments in our future

  • The proliferation of tax incentives and business tax cuts over the past two decades has resulted in several hundred million dollars each year cut from the state budget. This has undermined the state’s ability to support quality education, from pre-school through public colleges and universities, which in the long run will have serious consequences for state economic growth and prosperity.

Big ‘Oops’ for tax-cutters in school vetoes

Posted July 15th, 2015 to Blog

Governor Branstad’s vetoes of “one-time” funding pose “ongoing” and “recurring” problems for a major and ill-advised proposal by his allies to restructure personal income taxes in Iowa.

And they should.

During the last session, while lawmakers and the Governor were telling schools the state could not afford more than a 1.25 percent increase in per-pupil school aid, a group in the House was pushing a plan to let individuals choose a “flat” income tax rate option. In other words, figure your taxes under the current rate structure, then compare it to the flat rate, and choose which one costs you less.

It benefits primarily the wealthy, and it costs big money. There is no upside.

We have seen such a proposal in the past, and we are virtually guaranteed to see it again in some form in 2016. Not only does it compound fairness issues in Iowa’s tax structure, but it loses hundreds of millions of dollars in revenue, year after year, that Iowa legislators and the Governor have been telling us we cannot afford to lose.

Its supporters cannot avoid that contradiction, given their obsession this year about not letting a surplus — and a sustained one at that — be used for “ongoing” or “recurring” expenses on grounds they were not “sustainable.” Those are the grounds for the Governor’s vetoes of one-time funds for local schools, community colleges and state universities.

For good analysis of the 2015 alternative flat-tax proposal, which was not presented on the House floor as some of these messaging contradictions quickly became clear, see this Iowa Fiscal Partnership backgrounder by Peter Fisher. As Fisher noted, the projected revenue loss was projected at nearly half a billion dollars — $482 million — for the new fiscal year and around $400 million for each of the next three.

In short, the flat-tax idea is not “sustainable.” No need to discuss in the 2016 session.

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

More for Millionaires, Part II

Posted April 20th, 2015 to Budget, Equity and Fairness, Income Taxes, Taxes

Flat-Tax Option Grants Most of Benefit to Minority of Iowa Taxpayers — Plus Out-of-State Millionaires

PDF (2 pages)

Department of Revenue estimate — tax plan choices
Department of Revenue estimate — tax plan benefit differences

By Peter S. Fisher

The optional flat tax bill recently introduced in the Iowa House would give $26.5 million in tax cuts to people living outside the state, including almost 5,000 non-resident millionaires. The remaining $346.6 million in tax cuts for Tax Year 2015 would go to Iowa residents, but nearly two-thirds of that would go to the 1-in-8 taxpayers making $100,000 or more.

The bill does not cut income taxes for everyone. It provides an optional way of calculating tax, so that taxpayers would need to compute their taxes two different ways to determine which was better. The flat option is more likely to be advantageous for those over $100,000 per year. The Department of Revenue estimates about 54 percent of those taxpayers would choose the flat tax.

For the vast majority of taxpayers making less than $100,000, however, at most 35 percent would benefit from the flat tax option. Because the flat option does not allow any tax credits, lower income households using the Earned Income Tax Credit or other refundable credits would be unlikely to benefit from the flat tax, and certainly would not if they now receive a refund because of a credit.

Table 1 shows the number and percent of Iowa resident taxpayers choosing the flat option vs. the current system. For example, 61.5 percent of taxpayers earning $40,000 to $100,000 per year stick with the current system because the flat option would cost more; they would get no benefit. The remaining 38.5 percent of taxpayers in that income bracket would choose the flat tax and receive on average a $549 cut.

Table 1. Iowa Residents: Minority Benefit from Flat Tax Option

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Source: Tables 2A, 2B, 5A and 5B, for residents vs. non-residents, for tax year 2015, provided by the Iowa Department of Revenue upon request, March 31 and April 2, 2015.

While 858,000 Iowa resident taxpayers making under $200,000 a year (and representing 61 percent of all Iowa resident taxpayers) would see no tax reduction under this bill, a handful of Iowa millionaires would choose the flat option and gain an average of $26,798 each.

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Keeping Ahead of the Kansans

Posted April 9th, 2015 to Blog

As state legislators consider drastic cuts in Iowa’s income tax, they would do well to consider the experience of our neighbor Kansas, which enacted a huge income tax cut in 2012, and cut taxes again in 2013. These cuts have dramatically reduced state funding for schools, health care, and other services.

It is instructive to consider as well the experience in Wisconsin, where a large personal income tax cut took effect at the start of 2013, with similar results: subsequent job growth of 3.4 percent, farther below the norm than Kansas’ 3.5 percent from the implementation of its tax cuts.

None of this should come as a surprise. Most major academic research studies have concluded that individual income tax cuts do not boost state economic growth; in fact, states that cut income taxes the most in the 1990s or in the early 2000s had slower growth in jobs and income than other states.

Businesses need an educated workforce, and drastic cuts to education are likely to make it difficult to attract new workers, who care about their children’s schools at least as much as they care about taxes.

2010-PFw5464Posted by Peter Fisher, Research Director, Iowa Policy Project

See Fisher’s Iowa Fiscal Partnership Policy Snapshot on this issue.

 


Keeping Ahead of the Kansans

Posted April 9th, 2015 to Blog

As state legislators consider drastic cuts in Iowa’s income tax, they would do well to consider the experience of our neighbor Kansas, which enacted a huge income tax cut in 2012, and cut taxes again in 2013. These cuts have dramatically reduced state funding for schools, health care, and other services.

It is instructive to consider as well the experience in Wisconsin, where a large personal income tax cut took effect at the start of 2013, with similar results: subsequent job growth of 3.4 percent, farther below the norm than Kansas’ 3.5 percent from the implementation of its tax cuts.

None of this should come as a surprise. Most major academic research studies have concluded that individual income tax cuts do not boost state economic growth; in fact, states that cut income taxes the most in the 1990s or in the early 2000s had slower growth in jobs and income than other states.

Businesses need an educated workforce, and drastic cuts to education are likely to make it difficult to attract new workers, who care about their children’s schools at least as much as they care about taxes.

2010-PFw5464Posted by Peter Fisher, Research Director, Iowa Policy Project

See Fisher’s Iowa Fiscal Partnership Policy Snapshot on this issue.

 

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Keeping Ahead of the Kansans

IFP POLICY SNAPSHOT /

Iowa’s Neighbors Show the Folly of Drastic Cuts to State Income Tax

•  Big income-tax cuts in Kansas have dramatically reduced funding for schools, health care and other services.

2-page PDF

By Peter S. Fisher

As state legislators consider drastic cuts in Iowa’s income tax, they would do well to consider the experience of our neighbor Kansas, which enacted a huge income tax cut in 2012, and cut taxes again in 2013. These cuts have dramatically reduced state funding for schools, health care, and other services.

These Kansas tax cuts were touted as a powerful economic development tool. Businesses and jobs would flock to Kansas, and growth would be so strong that, according to some, state tax revenues would actually increase.

Instead, the state of Kansas has been forced to cut school funding each year since enactment. At a time when the majority of states have increased education funding to make up for cuts during the recession, general state aid in Kansas has continued to fall, and per pupil funding is 15 percent below pre-recession levels[i], with school closings and increased class sizes the result. Two districts recently announced they will have to end the school year early for lack of funds.[ii] The state recently abandoned the school funding formula; aid is no longer tied to enrollment. Most of the state’s reserves have been used up just to keep services afloat, leaving the state with no cushion to soften the effects of the next recession. The state’s bond rating has been lowered.[iii]

As for the tax cut being “a shot of adrenaline” for the state’s economy, as the governor predicted, the anticipated job growth did not materialize. Instead, private sector jobs in Kansas have grown by 3.5 percent since the tax cuts took effect, well below the 5.0 percent growth nationally over the same period.[iv]

It is instructive to consider as well the experience in Wisconsin, where a large personal income tax cut took effect at the start of 2013, with similar results: subsequent job growth of 3.4 percent, farther below the norm than in Kansas.[v]

None of this should come as a surprise. Most major academic research studies have concluded that individual income tax cuts do not boost state economic growth; in fact, states that cut income taxes the most in the 1990s or in the early 2000s had slower growth in jobs and income than other states.[vi] Businesses need an educated workforce, and drastic cuts to education are likely to make it difficult to attract new workers, who care about their children’s schools at least as much as they care about taxes. Nor will income tax cuts help small businesses create jobs. Only a tiny fraction of those paying income taxes own a business, and of those most are not in a position to create more jobs, or can expand employment only if demand for their services increases, regardless of taxes.[vii] 




[i] Michael Leachman, “5 Pieces of Context for the New Kansas Budget.” Off the Charts Blog, Jan. 16, 2015. http://www.offthechartsblog.org/5-pieces-of-context-for-the-new-kansas-budget/
[ii] http://www.huffingtonpost.com/2015/04/03/kansas-schools-funding_n_7001244.html
[iii] Reid Wilson, “Kansas bond rating downgraded after tax cuts.” The Washington Post, August 6, 2014. http://www.washingtonpost.com/blogs/govbeat/wp/2014/08/06/kansas-bond-rating-downgraded-after-tax-cuts/
[iv]Growth in total private employment, seasonally adjusted, from Dec. 2012 through January 2015, from the Bureau of Labor Statistics, Current Employment Statistics. The tax cut took effect in January, 2013.
[v] See note 4.
[vi] Michael Leachman, Michael Mazerov, Vincent Palacios, and Chris Mai. State Personal Income Tax Cuts: A Poor Strategy for Economic Growth. Washington, D.C.: Center on Budget and Policy Priorities, March 21, 2013. http://www.cbpp.org/files/3-21-13sfp.pdf
[vii] Michael Mazerov. Cutting State Personal Income Taxes Won’t Help Small Businesses Create Jobs and May Harm State Economies. Washington, D.C.: Center on Budget and Policy Priorities, February 19, 2013. http://www.cbpp.org/files/2-19-13sfp.pdf

2010-PFw5464Peter S. Fisher is research director of the Iowa Policy Project, which together with the Child & Family Policy Center formed the Iowa Fiscal Partnership, a nonpartisan initiative focused on helping Iowans to understand the impacts of budget choices and other public policy issues on Iowa families and services. IFP reports are at www.iowafiscal.org.

 

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More Millions for Millionaires

IFP POLICY BRIEF /

Flat-Tax Option Showers Benefits at High Incomes — Services Face New Cuts

2-page PDF

 

By Peter S. Fisher

Tax legislation pending in the Iowa House would shower most benefits on higher income Iowans, while reducing revenues by over half a billion dollars.

Already for the coming fiscal year, $277 million — two-thirds of the increased revenue to the general fund — is going to be funneled to commercial and industrial property tax relief. This will leave the state short of funds to adequately finance education and other services, before the new legislation would strip the general fund of another $482 million.

House File 604 would give taxpayers a choice each year: File income taxes using current law, or a new flat rate option. Under the flat rate option, the tax is 5 percent of all “base income,” where that is defined more broadly than current taxable income (no deduction for federal taxes), but allows the deduction of all federal interest, all retirement income, and a larger standard deduction.

Higher income Iowans would benefit most — Iowa tax filers with adjusted gross income of $40,000 or less (representing over half of all taxpayers) get just 6 percent of the $373 million in tax cuts for tax year 2015 under this bill, for an average of just $30 savings per tax filer (see Table 1).[i] Nearly two-thirds of the $373 million goes to those with income of $100,000 or more, representing just 1 in 6 taxpayers. Of that group, Iowa’s millionaires — representing just four-tenths of 1 percent of taxpayers — get 10 percent of the total benefit, or $5,463 each.

Table 1. Tax Savings from HF604 Flow Mostly to High Income Iowans

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Source: Letter from the Iowa Department of Revenue to Jeff Robinson, Legislative Services Agency, March 26, 2015. Note: This table omits $11.5 million in tax benefits for 2,542 composite returns with unknown AGI. This amount is part of the $373 million total tax reduction.

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Iowa’s millionaires get 183 times the average benefit of those under $40,000 in income (Figure 1). Those with $1 million or more income get on average a 15 percent tax cut; other taxpayers average 11 percent.

None of this should be surprising given provisions in the bill. Key points:

  • The flat tax option cuts the top rate — which applies to income over $69,225 — by 44 percent.
  • The tax rate on taxable incomes below $13,851, now between 0.36 percent and 4.5 percent, would actually be higher under the flat tax.
  • While the flat tax option does eliminate the deductions for federal taxes, itemized deductions, and Iowa capital gains (features of the current tax that benefit primarily higher income taxpayers), it also eliminates all taxes on pension income.

Since current law already exempts all of Social Security benefits and the first $6,000 per person of pension income, eliminating the rest of the tax on pensions primarily benefits higher income seniors. The flat tax option also eliminates all tax credits, some of which (such as the Child and Dependent Care Credit and the Earned Income Tax Credit) are worth more to lower income taxpayers.

Moving to a flat tax does nothing for tax simplification. Claims to the contrary are entirely disingenuous. The bill does not substitute a simpler tax for the current calculation; it offers taxpayers the option of filing under the current system or the alternative flat tax. Thus taxpayers will have to figure their tax both ways to determine which one works to their advantage. This additional complication also increases the cost of tax administration by an estimated $796,000.[ii]

The bill will almost certainly cost the state’s general fund more than the estimates provided in the Department of Revenue tables. As the DOR points out, giving taxpayers an option provides an opportunity for taxpayers to game the system by filing under the current law one year and the flat option the next. For example, a taxpayer could have extra federal tax withheld during 2015 and then file Iowa income tax for 2015 under current law, deducting all those extra federal taxes and reducing Iowa tax. In April 2016 the taxpayer receives a large federal refund because of overpaying for 2015. But the taxpayer files Iowa tax for 2016 using the flat rate option and so does not have to add the refund to Iowa taxable income as would be required under current law. The entire amount of the federal refund, deliberately inflated by the taxpayer, thus represents Iowa income that should be taxable but escapes Iowa income tax entirely. The DOR had no way of knowing the extent of such gaming and so could not include its effects in its revenue estimates.

In sum, the flat tax bill is a very expensive effort to sharply cut taxes, mostly for upper income Iowans, and especially for millionaires. It would put a large hole in state finances for years to come, undermining the state’s ability to maintain a quality education system.


[i] The $373 million is the amount for tax year 2015 — that is, the reduction in taxes owed for income received during calendar 2015 on tax returns filed by April 2016. The Department of Revenue has translated tax year losses into fiscal year losses. The reduction for FY2015 is estimated at $482 million, then settles down to around $400 million for each of the next three fiscal years.

[ii] Letter from the Iowa Department of Revenue to Jeff Robinson, Legislative Services Agency, March 26, 2015.

Note: This Policy Brief, originally circulated March 25, 2015, was revised March 26 with new estimates from the Department of Revenue, which previously had estimated a larger benefit than shown here to filers with adjusted gross income greater than $1 million.

2010-PFw5464Peter S. Fisher is research director of the Iowa Policy Project, which together with the Child & Family Policy Center formed the Iowa Fiscal Partnership, a nonpartisan initiative focused on helping Iowans to understand the impacts of budget choices and other public policy issues on Iowa families and services. IFP reports are at www.iowafiscal.org.

Iowa’s Problem of Priorities

IFP BACKGROUNDER / 
Costly Business Property Tax Cut Excessive — Hurts Family, Kids’ Services 

2-page PDF 

Tax cuts have consequences. In the case of the massive commercial property tax cut enacted two years ago, those consequences have become all too real.

Iowa’s economy continues to rebound and state revenues are projected to rise nearly 5 percent next year, yet we find ourselves struggling to finance our most important basic services, like education. Why? Because we are giving away most of the increased revenue to commercial property owners, with no public benefit to show for it.

The commercial property tax cut will result in an estimated $277 million hit to the state budget next fiscal year, more than double this year’s cost as provisions phase in.[1] This means that the property tax cuts will consume 68 percent of the estimated $408 million in increased state revenue.[2] The small amount remaining is far too little to cover even the normal increases in the cost of providing public services due to inflation.

While the legislation has been sold as a general property tax cut, only 11 percent of the property tax reductions will flow to residential and agricultural property owners next year.[3] The rest goes to owners of commercial property, apartment buildings, industrial facilities, railroads and utilities.

The legislation has two major provisions. A Business Property Tax Credit is entirely state funded and is of more benefit to owners of small properties, since the maximum value of the credit represents a larger share of their taxes. The most costly provision reduces the assessed value of commercial and industrial property to 90 percent of actual value, with the state reimbursing localities for the resulting revenue lost.[4] This provision lavishes the majority of its benefits on large property owners.

About $5 million will flow next year to the 11 largest big-box retailers, none of them Iowa companies.[5] While this is real money flowing out of the Iowa treasury, a few hundred thousand a year to the likes of Wal-Mart or Target is of little import to them, and will have no effect on their decisions to build in Iowa, which are driven by the size of the consumer market here. There was never a case for commercial tax reductions; overall business tax levels in Iowa for a long time have been below the national average — a point you rarely hear, and never from the business lobby.[6]

What exactly are the consequences?

The cost of running schools will keep rising faster than state aid, resulting in layoffs, increased class sizes, program reductions, and more years of outdated textbooks.

The Governor’s budget proposes sizable cuts to state health care programs and requires state agencies to finance salary increases by reducing staff, thus reducing state services.

Once again we will not expand the state’s preschool program for 4-year-olds, a measure that has been shown to be an effective economic development tool yet fails to help many low-wage workers needing full-time preschool.

Our child care assistance program, with one of the lowest income cutoffs in the country, will keep penalizing families for earning more. Bi-partisan support for funding to improve water quality and expand access to mental health care will likely be for naught.

We have a problem of priorities. We keep underfunding services for average Iowa families — education, health, work supports, natural resources — in order to finance massive tax reductions to businesses that don’t need it. And we spend in excess of $350 million each year on business tax credits that continue on autopilot, with no sunset, despite the state’s own analyses that fail to find evidence of appreciable benefit to the state from some of the largest of these subsidies.[7] 

It is time to admit that the tax cuts enacted in 2013 were excessive, and are causing long term damage to the state. At the very least, the $50 million increase in the business property tax credit portion of those tax cuts scheduled for next year should be delayed or eliminated.

But that is not enough. There should be a moratorium on any further tax cuts or tax credits. All business tax credits should be subject to effective caps and sunsets to force a serious evaluation.

Without such measures, we will continue down the road of tax-cutting our way to mediocrity and shortchanging our children’s future. 

                      

2010-PFw5464A shorter version of this piece appeared as a guest opinion by Peter Fisher, Research Director of the Iowa Policy Project, in The Des Moines Register on March 6, 2015. This version has been updated to reflect March estimates by Iowa’s Revenue Estimating Conference. (See endnote 2)

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




[1] The Legislative Service Agency projects that general fund appropriations resulting from the property tax legislation will total $277.1 million for FY2016: $162 million to replace local revenue lost because the bill reduced commercial and industrial assessments to 90 percent of actual value, $14.9 million in state foundation aid to schools triggered by the reduction in assessed value, and $100 million for the business property tax credit. LSA, Fiscal Services Division, Summary of FY 2016 Budget andDepartment Requests, December 8, 2014, page 53. https://www.legis.iowa.gov/docs/publications/LADR/435197.pdf

[2] The $408 million represents the increase in state’s net receipts plus transfers, according to the Revenue Estimating Conference, March 19, 2015. The increased revenue was estimated at $338 million in December. However, the larger increase comes about not because the March revenue estimates for FY2016 are higher (they are actually a little lower) but because the revenue estimate for the current fiscal year dropped $90 million. Thus while the increase looks bigger it is a result of a worse fiscal situation for the state. https://www.legis.iowa.gov/docs/publications/BL/656455.pdf

[3] Legislative Services Agency, Fiscal Note on SF 295, May 22, 2013. https://www.legis.iowa.gov/DOCS/FiscalNotes/85_1464SVv2_FN.pdf

[4] The state promised to reimburse these losses fully only through FY 2017; after that, local governments will be on the hook for an increasing portion of the lost revenue. In addition, the state is not reimbursing localities for any of the revenue lost from a third provision that reduces the assessed value of residential rental property.

[5]Estimate based on January 2012 taxable values and the statewide average property tax rate on commercial property of 3.77 percent for FY2015.  The 11, in order by 2012 valuation statewide and with the location of the corporate headquarters, are Wal-Mart (AR), Target (MN), Menard’s (WI), Lowe’s (NC), Walgreen’s (IL), Kohl’s (WI), Younkers (PA), Home Depot (GA), K-Mart (IL), Best Buy (MN), and Sears (IL). The 11 had $1.33 billion in taxable valuation, so that the reduction to 90 percent for January 2014 values amounts to $133 million, assuming valuations before the reduction remained about the same.

[6] Iowa: Where Business Taxes are Low. Iowa Fiscal Partnership, March 5, 2014.  http://www.iowafiscal.org/iowa-where-business-taxes-are-low/

[7] Iowa Department of Revenue, Contingent Liabilities Report, December 2014 https://tax.iowa.gov/sites/files/idr/Contingent%20Liabilities%20Report%201214.pdf. For evaluations of tax credits by the Iowa Department of Revenue see https://tax.iowa.gov/report/Evaluations?combine=Study; also of note is the State of Iowa Tax Credit Review Report, prepared by the Governor’s Tax Credit Review Committee, January, 2010. http://www.dom.state.ia.us/tax_credit_review/files/TaxCreditStudyReviewReportFINAL1_8_2010.pdf

When Iowa Wages Fall Short, Do Policy Choices Fill the Gap?

What does it take to get by these days? The Cost of Living in Iowa, 2014 Edition, from the Iowa Policy Project answers this question, and connects the answer to public policy choices that are in the hands of state and federal lawmakers. We present this report in three installments, outlined below, with links to the three pieces and support materials.

Part 1 — Basic Family Budgets

View full report or download 22-page PDF
News release
County data (map, printable tables)
County and regional data (spreadsheet)

Iowans pay differing amounts for the basic living essentials depending on where they live. A family living in Linn County and a family living in Clay County will face different housing costs, commuting times and health insurance premiums; child care costs will differ as well. Part 1 of this report details how much families throughout the state must earn in order to meet their basic needs and underscores the importance of public work support programs for many Iowans, who despite their work efforts, are not able to pay for the most basic living expenses.

Below, see how costs compare for families in your county and neighboring counties; click on any county for the data.

map

Union Shelby Woodbury Ringgold Van Buren Wapello Scott Sioux Sac Tama Webster Warren Washington Wayne Wright Worth Winnebago Winneshiek Muscatine Mahaska Poweshiek Jasper Marion Monroe Lucas Page Montgomery Pottawattamie Mills Monona Marshall Story Humboldt Pocahontas Palo Alto O'Brien Plymouth Mitchell Hamilton Hardin Grundy Guthrie Franklin Madison Keokuk Louisa Iowa Lee Henry Fremont Ida Jones Linn Howard Kossuth Hancock Johnson Jackson Harrison Greene Jefferson Decatur Davis Emmet Floyd Delaware Dubuque Fayette Dallas Dickinson Des Moines Butler Buena Vista Boone Bremer Clayton Chickasaw Cerro Gordo Cass Crawford Calhoun Clay Cherokee Clarke Carroll Buchanan Black Hawk Benton Clinton Cedar Audubon appanoose Adair Adams Osceola Allamakee Lyon Taylor Polk

Part 2 — Many Iowa Families Struggle to Meet Basic Needs

View full report or download 6-page PDF
News release

Part 2 shows that over half the jobs in Iowa pay less than what is needed by many families to achieve basic self-sufficiency. How many Iowa families earn below the family supporting income levels reported here? How many families, in other words, must rely on work supports to get them closer to the basic needs budget level?

Fig 2 graph: basic needs vs. median

Part 3 — Strengthening Pathways to the Middle Class: The Role of Work Supports

View full report or download 21-page PDF
View executive summary or download 3-page PDF
News release or download 2-page PDF

Part 3 examines what are known as the “cliff effects” that occur when a family makes just enough to lose eligibility for various work support programs — creating an “income cliff” that costs far more than they gain from a meager pay increase.

Fig 2 graph: basic needs vs. median

Issues in Waiting: Tax-Increment Financing Reform

Posted October 2nd, 2014 to Blog

Basic RGBThis is an excerpt from an interview with IPP’s Peter Fisher on “The Devine Intervention,” KVFD-AM 1400, Fort Dodge. Host Michael Devine discussed tax-increment financing, or TIF, with Fisher, whose reports on this issue have prompted many to call for reform. TIF is one of Iowa’s “Issues in Waiting” — issues discussed year after year, but not resolved. The quotes below are actual quotes from the interview; the questions are paraphrased.

What was the idea behind tax-increment financing, or TIF?

It was originally a tool to help cities redevelop blighted or declining areas and what it did was allowed a city to capture more of the tax revenue from redevelopment when the city undertook some project to try to turn around a declining neighborhood. If they were successful, businesses would come in, the tax base would go up.

And what TIF did was allow the city to use not just the city taxes on all that growth, but the county and school taxes as well for some period of time to pay the city back for their expenses for this project, for redevelopment. And in the long run the county and school districts were better off. The cities got their money back, they got more tax base. That was the idea.

How did the implementation of TIF look?

It worked that way for quite a while. And then about 20 years ago we opened the door to just about anything cities wanted to do by saying well it doesn’t have to be a blighted area, it doesn’t have to be a redevelopment. It just has to be “economic development.” And just about anything cities do it turns out they can call “economic development” and finance with TIF.

Is there a consequence if TIF is abused?

Not really — as long as they are doing something within the law. The county and the school district don’t have any say on whether the city is going to divert their taxes to the city’s TIF fund. And there’s no state regulation either, other than the court system.

To hear the full interview, click here.

For more resources from Peter Fisher and the Iowa Fiscal Partnership about TIF, click here.