Archive for the ‘Economic Opportunity’ category

Issues in Waiting: Tax-Increment Financing Reform

October 2, 2014

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.

Iowa JobWatch: Jobs Rise in August, Still Sluggish

September 19, 2014

IOWA CITY, Iowa — Iowa nonfarm jobs increased in August to 1,553,500, but the unemployment rate remained at 4.5 percent, down from 4.7 percent a year ago. The Iowa Policy Project today released the following statement by research associate Heather Gibney about the latest numbers:

“The month of August saw a very small increase in total nonfarm jobs, which is right in line with the fact that Iowa’s major job sectors lost about the same amount of jobs that were gained. Professional and business services and leisure and hospitality saw the largest gains while construction experienced the biggest loss.”

“It’s also important to look at long-term trends rather than one-month changes. Iowa is now above pre-recession job levels — but those jobs serve a 4.9 percent larger population, according to the Economic Policy Institute (EPI). The net job gain since the December 2007 start of the recession is only 28,600 — but 75,400 jobs were needed by now to keep up with population growth. Therefore, the state shows a job deficit of 46,800 jobs.”

Job Growth Perspective

Governor Branstad set a goal of 200,000 new jobs over five years. Iowa’s economy has produced 77,300 net new jobs through the first 43 months of his term. To add the remaining 122,700 jobs, Iowa would need to add 7,200 new jobs per month over the next 18 months, compared to a pace of 1,800 for the first 43 months.

Key Numbers

  • Nonfarm jobs held steady in August at 1,553,500. Nonfarm jobs are 18,000 ahead of where they stood a year earlier.
  • Nonfarm jobs are 25,500 ahead of the May 2008 peak of 1,528,000, and 28,600 ahead of the level at the start of the last recession in December 2007.
  • The unemployment rate remained at 4.5 percent in August but was down from 4.7 percent a year earlier.
  • The labor force — those working or looking for work — rose by 2,400 from July to 1,703,000 and was up 29,800 over 12 months.
  • Initial unemployment claims were 11,445 in August, down 11.2 percent from July and 4.6 percent from a year earlier. The number of continuing claims — 23,053 — was down 6.6 percent for the month and down 7.5 percent for the year.
  • Five sectors posted gains in August led by professional and businesses services and leisure and hospitality (1,200), trade and transportation (500), financial activities (300) and mining (100).
  • These increases were offset by losses of 1,100 in construction, a loss of 600 in education and health and government jobs, a loss of 500 in manufacturing, 200 in other services, and 100 for information jobs.

Key Trends

  • All job sectors except information and manufacturing have shown net gains over the last 12 months. Construction jobs are up 3.2 percent over the year, with changes in other major categories up by less than 2.4 percent over 12 months.
  • 300 jobs were added during the month of August.
  • Iowa averaged a monthly increase of about 1,500 jobs over the last 12 months.
  • For a full year, Iowa has remained above the previous job peak of 1,528,000, reached in May 2008, just before jobs began to plummet during the last recession.

 

Beware the “business climateers”

August 18, 2014

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:

 

Comforting the comfortable

July 25, 2014

Comfort the comfortable and penalize the poor. Like the idea? If so, you’ll really like legislation scheduled for consideration today in the U.S. House of Representatives.

The House is scheduled to take up legislation that would gut improvements for low-income Americans in the Child Tax Credit (CTC), improvements passed originally in 2009, renewed in 2010 and 2012, the latter as part of the “fiscal cliff” package, where it was used as a bargaining chip to pass very expensive exemptions in the estate tax — a benefit only to America’s super-rich.

To put this in context, the House leadership bringing this new legislation to a vote will not even consider an increase in the minimum wage, now stagnant over five years nationally (6 1/2 in Iowa). The CTC, it must be noted, is one of the nation’s most effective anti-poverty tools, offsetting part of the cost of raising a child. So, as families earning at or below the minimum wage continue to lose ground, the CTC proposal will set them back even further. As noted by the Center on Budget and Policy Priorities (CBPP):

But a single mother with two children who works full time throughout the year at the minimum wage of $7.25 an hour (which House leaders oppose raising) and earns just $14,500 would lose $1,725. Her CTC would disappear altogether.

A loss at lower incomes — yet a boost at higher incomes. According to Citizens for Tax Justice, the Iowa impact of the new legislation would be:

  • a $285 loss on average to families with incomes below $40,000, and
  • a $696 benefit (tax cut) to families with income above $100,000.

Here’s how it works, according to a summary by CTJ:

The House Republican bill, H.R. 4935, would expand the CTC in three ways that do not help the working poor. First, it would index the $1,000 per-child credit amount for inflation, which would not help those who earn too little to receive the full credit. Second, it would increase the income level at which the CTC starts to phase out from $110,000 to $150,000 for married couples. Third, that $150,000 level for married couples and the existing $75,000 income level for single parents would both be indexed for inflation thereafter.

Adding insult to injury for low-income folks is that the improvements targeted for repeal came in the aforementioned “fiscal cliff” package, which made permanent big estate tax breaks for the rich, while extending improvements in the Child Tax Credit and Earned Income Tax Credit for only five years. CBPP’s Robert Greenstein at the time called that a “bitter pill.”

That was before these new proposals not only to cut back the CTC for lower-income families — but to expand access at higher incomes — and to adjust the high end for inflation, something lawmakers have refused to do for the minimum wage.

A bitter pill? At least. For some, all of this might seem to be an overdose.

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

Focusing better on new Iowans

July 3, 2014

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

What are U.S. workers missing?

June 23, 2014

Visiting other counties can mean drinking coffee in cafes, museums, night life and relaxing next to the sea. The best trips also include conversations with people from these lands.

I just taught a class in Romania and then visited Scandinavia to see friends and relatives. In both places I talked about work and family life. The first issue that always comes up is paid vacation, which America does not require.

What many U.S. workers may not know is that every other developed country has a legal requirement for paid vacation and holidays. All countries in the European Union require at least four weeks of paid vacation. Austria is the most generous, guaranteeing workers a legal minimum of 22 paid vacation days and 13 paid holidays each year.

U.S. workers have to depend on competition for such benefits. Companies must compete for workers. So in the U.S. the average worker gets 16 paid vacation days and holidays. However, that average is brought down by the fact that 1 in 4 U.S. workers does not have a single paid day off. That would not be allowed in Europe, or New Zealand, or Japan or Canada. In Canada, the federal government requires 19 paid days, and some provinces add additional time.

This data, from the Center for Economic and Policy Research (CEPR) and USA Today, reflects what I heard in conversations during the last few weeks.

I can hear it now: Raising benefits will cost jobs. Wrong. The CEPR data comes from 2012 when Germany with one of the most generous time-off packages had an unemployment rate of just 5.5 percent when ours was 8.1. It becomes part of the overall marketplace.

Maternity leave is another benefit where the U.S. falls behind. According to the International Labour Organization and a study at McGill University in Canada, the U.S. joins Papua New Guinea, Swaziland, Liberia and Lesotho as countries that provide no financial support for working mothers through their job.

Since Bill Clinton pushed through the FMLA (the Family and Medical Leave Act), a mother in the U.S. can take off 12 weeks to give birth but there is no requirement that the time off be paid. Again when I talked to people on my recent trip, I was amazed that a worker in Sweden can get 420 days to take care of a new baby with 80 percent pay. That can be shared between the mother and father.

Most other countries are not so generous but Germany gives 14 weeks and Denmark requires a full year at 100 percent of pay. Japan demands 14 weeks at 67 percent of pay. In New Zealand, 14 weeks are paid at 100 percent and one can ask for another 38 weeks unpaid. Canada requires 52 weeks, with 17 weeks paid.

These are countries with successful economies. In some, jobs are harder to get than in the U.S. but in others, like Germany and New Zealand, the unemployment rate is lower than ours.

Travel overseas is a good thing. You get to relax, recharge the batteries and come back ready to do your job better.

You also might learn that what we have come to accept as reasonable family and work life in this country is so out-of-step with the rest of the world.

IPP-osterberg-75  Posted by David Osterberg, Founding Director of the Iowa Policy Project

Watching Iowa jobs: Don’t miss the deficit

June 20, 2014

Iowa’s up-again, down-again job picture is looking up again, at least for now. The May numbers from the state show an increase of 6,200 jobs. Coming on the heels of a 3,700 increase in April, this marks the first two-month gain since the end of last year, and the increase is the largest since last October.

One-month results, however, do not tell the whole story of what’s happening in the state economy and the job market. Over the past year, Iowa has averaged a gain of about 2,100 jobs per month, which is a modest pace. At this rate it would take about three years for Iowa to completely recover from recession losses.

In fact, even though Iowa has more jobs than it did when the recession started, the state shows a jobs deficit:

Basic RGBSource: Economic Policy Institute

Given that the population of Iowa has grown since the start of the recession, it makes sense that more jobs need to be added to the economy each year in order to keep up with the growing number of people. According to the Economic Policy Institute, 23,800 jobs have been added so far but 71,600 were needed by now to keep up with this growth. This means that there aren’t enough jobs for everyone who wants or needs one — a deficit of 47,800, as shown in the graph above.

For more about the latest Iowa job numbers, see our new Iowa JobWatch report. IPP has given its view of the monthly numbers since 2003 — there are always plenty of new angles for a “Job Watcher.”

IPP-gibney5464   Posted by Heather Gibney, Research Associate


Follow

Get every new post delivered to your Inbox.

Join 1,665 other followers

%d bloggers like this: