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Policy Points from Iowa Fiscal Partners

Posts tagged taxes

Illusory and elusive economic strength

Posted August 29th, 2019 to Blog

This Labor Day we celebrate the successes of the labor movement and workers across Iowa. In that spirit, let’s look at how our economy is doing a decade after the Great Recession. Why doesn’t this feel like an economic recovery? And, isn’t it a bit late to call this a recovery?

Wages

In terms of wage growth, only high-wage earners (making $41.53 hourly) have seen meaningful wage growth over the past 10 years. We see disparities in Midwest median wages by gender and race: Women make $4 less per hour than male peers, and Latino and African American workers make $5 less per hour than their white peers. As we will demonstrate in an upcoming report, these disparities are driven by structural factors like discrimination before and after hiring and the loss of unionized manufacturing jobs.

 

 

 

Jobs

Job growth in Iowa has been slow this year compared to monthly averages from 2011 to 2014. A low unemployment rate shrouds the reality that many Iowans have low-paying jobs without benefits, with some cobbling together multiple part-time jobs. We are almost 40,000 jobs short (graph below) of what is needed for a full recovery from the last recession when considering population growth.

Family Security

Many working Iowa households are unable to meet basic needs despite having one or more full-time worker in the house. For example, IPP’s Cost of Living in Iowa analysis shows 6 in 10 single-parent working households are unable to make ends meet on their earnings alone. When companies aren’t paying enough, these households need public assistance (work supports) for food, housing and other necessary items.

Taxes

Iowa’s tax system is upside down with low-income Iowans paying a larger share of their income in state and local taxes than the richest Iowans. Large corporations can reduce their state corporate income tax to zero and even receive a refund through Iowa’s Research Activities Credit, with refunds — checks to companies that had more tax credits than they needed to pay their taxes — totaling $43.7 in 2018.

Public investments

Iowa state and local spending as a share of personal income has remained virtually unchanged over the past 12 years, contrary to standard political rhetoric at the Capitol. State K-12 funding has not kept up with costs of educating children. Public spending on private schools continues to rise. The Iowa private scholarship subsidy cap doubled in nine years.

The hard work of Iowans ought to be celebrated through public policy that raises wages along with worker productivity. This would allow wages to keep up with the cost of living. Better public policy would protect workers on the job, and ensure a dignified retirement.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project.

nveldhouse@iowapolicyproject.org

Water funding exposes shallow commitment

Posted May 6th, 2019 to Blog
Voters have indicated their support for increasing funding to improve water quality in Iowa, earmarking part of the next sales tax increase for clean water. So far, the protected trust fund for outdoor recreation and water quality remains empty. Our latest water quality report addresses these issues:
  • What has been the state’s spending commitment to water quality over the past 15 years?
  • How much of state and federal dollars goes to reduce nutrient pollution in Iowa?
  • How much spending is needed to make meaningful water quality progress?
  • How can the state raise adequate revenue to make an impact?
We identified 16 primarily state-level programs that fund water quality improvements. Funding in the most recent year hasn’t even reached 2008 to 2009 levels. The Nutrient Reduction Strategy (NRS), implemented in 2013, was created to reduce nutrient pollution that creates a hypoxic dead zone in the Gulf of Mexico. The strategy was advertised as a new commitment by the state to reduce Iowa’s pollution of our own rivers and the Gulf of Mexico. Even with the NRS, we find that state water quality spending has dropped off and struggled to return to pre-2008 recession levels. 190424-WQ-Fig1 The Water Resources Coordinating Council is tasked with overseeing NRS progress, and measures the financial resources dedicated to reducing nutrient pollution from the state of Iowa to the Mississippi River system. The most recent NRS report shows $512 million was spent in state and federal dollars on Iowa nutrient reduction in 2017.[1] However, the state is largely riding the wave here; the real money comes from federal funding. While it was assumed that adopting the NRS would increase Iowa’s commitment to water quality, it did not — though at the same time pollution has increased. Recent research indicates Iowa’s share of nutrient loading into the Mississippi and Missouri river watersheds actually increased between 2000 and 2016.[2] In 2018, Governor Kim Reynolds signed a bill that appropriates $282 million to water quality efforts over the next 12 years.[3] This gesture compares poorly even to existing — and lacking — government water quality spending. Iowa is nowhere near to what is needed. How much money does it really take to make a meaningful impact on Iowa water quality? The NRS document, written mainly by Iowa State University, estimated the cost of reducing nonpoint contamination under three scenarios. All were in the billions of dollars. The Iowa Soybean Association estimates for nutrient reduction costs in just one river basin, the Lime Creek Watershed,[4] implies a statewide need of $1.4 billion a year for about 15 years. These estimates demonstrate the inadequacy of the 2018 spending bill. Current investments are not resulting in discernible improvements in Iowa’s water quality. Two options available for generating the amount of revenue needed include removing the exemption of fertilizer used in agriculture and taxing it like other commodities. A second option is fully funding the environmental trust that voters approved in a statewide referendum in 2010. Estimated revenue from either of these sources would bring more than $100 million per year. We need to tap new sources to make our state commitment to water quality equal to the task. Until then, we are only paying lip service to the problem. [1] Iowa Water Resources Coordinating Council, “Iowa Nutrient Reduction Strategy 2017-2018 Annual Progress Report. Page 9. http://www.nutrientstrategy.iastate.edu/sites/default/files/documents/NRS2018AnnualReportDocs/INRS_2018_AnnualReport_PartOne_Final_R20190304_WithSummary.pdf [2] Christopher Jones, Jacob Nielsen, Keith Schilling, & Larry Weber, “Iowa stream nitrate in the Gulf of Mexico.” April 2018. PLOS. https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0195930&type=printable [3] Brianne Pfannenstiel, “Reynolds signs water quality bill, her first as governor.” January 2018. https://www.desmoinesregister.com/story/news/politics/2018/01/31/reynolds-signs-water-quality-bill-her-first-governor/1082084001/ [4] Iowa Soybean Association Environmental Programs & Services, “Lime Creek Watershed Improvement Plan: A roadmap for improved water quality, sustained agricultural productivity & reduced flood risk. N.D. https://www.iasoybeans.com/search/?q=lime+creek   2018-NV-6w_3497(1)   Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

Focusing better on new Iowans

Posted July 3rd, 2014 to Blog

Oftentimes the topic of immigration reform stirs up heavy debates and preconceived notions about what it means to be an immigrant in the United States. Reality about immigrants, their occupations and contributions to the economy can be misunderstood.

But here in Iowa, we know immigrants are important to our state and our economy. There are 120,000 documented and undocumented immigrants contributing both as workers and as employers. Most immigrants came to find jobs so it shouldn’t be surprising that most are of prime working age, and are working.

Look around your community and you will see them working in grocery stores and delis as butchers and meat cutters, teaching in high schools and colleges, cleaning homes and businesses, and working as computer programmers. Some are small business owners, filling gaps for particular goods and services in Main Street-type businesses.

10371388_10154327977850154_8158749370873517078_nOne big misunderstanding is about the state and local taxes that immigrants pay, regardless of their legal status, on the income they earn, the goods they purchase and the homes where their families live.

It is also estimated that 50-70 percent of undocumented workers — those who do not have legal authorization to work or live in the United States, have federal and state income and payroll taxes withheld from their paychecks.

Our new Iowa Policy Project report estimates that undocumented immigrants annually pay $64 million in Iowa state and local taxes, increasing revenue available for public programs and services, including many services they are unable to access themselves.

Immigration reform enabling work authorization and a path to citizenship for current undocumented residents would bring benefits not only to immigrants but all Iowans. Legal work status would open up better job opportunities and make it more worthwhile to invest in worker education and training. Immigrants would be less susceptible to wage theft and other exploitation by employers.

Legal status would increase earnings for workers and revenues for the state. It would mean that young adults brought here as children (DREAMers) could attend college and get better jobs and it would give immigrant business owners access to more options to start or expand a business.

While the future of immigration reform is uncertain, we can be certain that immigrants contribute to the state’s workforce, economy, tax revenues and communities.

IPP-gibney5464Posted by Heather Gibney, IPP Research Associate


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