Breaking news out of Des Moines is that many Iowa taxpayers will be eligible for an extra $54 tax credit.
This is the result of one of the most short-sighted pieces of legislation passed by the Iowa General Assembly in recent years. Lawmakers created what they called the “Taxpayers Trust Fund,” which we should call the “Giveaway Slush Fund.” It’s a pot of money to dole out to taxpayers and boast about at election time. Chances are, the “givers” won’t give you the whole picture.
Their game is an illusion, a political parlor trick: Hold down funding for key priorities, such as K-12 education, or universities, and then when revenues create a surplus, call it an “overpayment” by taxpayers.
Does anyone really believe their spin? The $120 million to be given away represents easily $120 million in services that could have been provided. For K-12 alone, a little over half of it could have been used this year to fully pay the state’s share of allowable growth at the 4 percent level lawmakers authorized. Instead, state funding only supports half of the state share.
By shortchanging school districts with funding for only 2 percent allowable growth this year despite strong revenues, lawmakers compounded a trend of squirreling away big dollars while claiming poverty. This way, they have given themselves $120 million to spend on dessert — the Giveaway Slush Fund — by choosing not to pay the state’s share of the bill for the meat and potatoes: school aid.
One Iowa columnist who has seen through this is The Des Moines Register’s Rekha Basu, who noted Sunday: “Doling out money piecemeal is a gimmick that may bring smiles to some faces but it can’t take the place of sound and consequential actions.” She’s right.
Is it really worth it to you to receive the $54, instead of putting adequate and appropriate funding back into our education system? Or cleaner water? Or safer streets? Or, well, you get the idea.
Give me a break. On second thought, don’t.
Posted tagged ‘Iowa Policy Project’
Breaking news out of Des Moines is that many Iowa taxpayers will be eligible for an extra $54 tax credit.
This item reported by The Des Moines Register’s Donnelle Eller came as a breath of fresh air to those concerned about the energy demands of big data centers coming to Iowa.
Facebook says it will begin operating its new data center in Altoona in early 2015 powered entirely by renewable energy that will come from a new wind project in Wellsburg, Ia. …
Iowa has become home to a growing number of massive data centers in recent years, first Google, followed by Microsoft and Facebook. Experts cite Iowa’s low energy costs — and rich incentives — for attracting the tech companies.
At IPP, our research has covered many areas of public policy, but two strong themes that have emerged are these:
- Clean renewable energy such as wind and solar can enhance economic growth in our state; and
- Economic development “incentives” must be designed to pay long-run dividends to the state to truly offer a public benefit.
Iowa won the bidding war with Nebraska not because we gave away more taxes but because we had more wind power. Facebook had a deal with environmental organizations to stop being a dirty energy hog so they came to a place where they could easily get wind power. And all that wind power in Iowa (24.5 percent of the total electricity generated last year was from wind) has not caused our overall electric rates to spike. So other companies like the Iowa environment as well. Clean energy seems to get us more high quality jobs.
Most of the “rich incentives” in Iowa’s economic development playbook do not incentivize anything that would not happen anyway because they are focused on tax breaks for companies that pay little or no taxes in the state to begin with, and in any event are such a small part of business costs that they have little bearing on location decisions.
But clean energy does matter. The promise of renewable energy, such as wind power, rests with the recognition that as we invest in new energy sources to meet demand of the future, we can do so in a way that does not harm our environment and keeps energy costs down over the long term.
In this case, Facebook is following a course, beyond giveaways, that more companies should consider when thinking about where to locate or keep operations.
The Iowa Policy Project keeps producing good reports about the causes of water pollution and how to address it.
Our report last week, Managing Water Pollution With Urban Wetlands: How Cities Reduce Contamination from Farms and Urban Development, was released on October 30. This IPP report, authored by J. Elizabeth Maas & E. Arthur Bettis, received a great deal of media attention. It was front page above the fold in both the Cedar Rapids Gazette and the Iowa City Press-Citizen. It was also covered by the Des Moines Register, Iowa Public Radio and WHO Radio, and the subject of a talk show on KVFD-AM in Fort Dodge.
While our report dealt with urban wetlands, many of the questions from the media folks who participated in our call-in news conference were about agricultural wetlands. That is no surprise since so much of the water pollution problems in Iowa come from the farm.
IPP pointed out that reality in a 2010 report that can be found on our website: Solution to Pollution: It Starts on the Farm by Andrea Heffernan, Teresa Galluzzo and Will Hoyer, released in September 2010. That report pointed out that so little land in Iowa is devoted to urban uses (lawns or golf courses) that even if urban application rates of Nitrate and Phosphorus fertilizer were much higher than that on farms, the fact that two-thirds of Iowa land is in corn or soybeans means that only 2 percent of the pollution from land application of fertilizer comes from lawns and golf courses.
Agriculture still dominates even if you include sewage treatment plants in the urban share of nutrient pollution (see graph below).
So the takeaway message — water pollution in Iowa comes from agriculture. We all have an obligation to clean up our rivers, lakes and streams and no sector can be exempt. It is not a voluntary matter.
All right! The first of the month! Always a big day for those living paycheck to paycheck. And November 1 is no exception.
Yet, for those working low-wage jobs and receiving SNAP benefits, November 1 is not as good as October 1. SNAP is the Supplemental Nutrition Assistance Program, which many know as Food Stamps. And it’s under constant attack.In Iowa, the more than 420,000 people who count on food assistance can count on less this month than they received a month ago.
Same goes for SNAP recipients across the country, as benefits drop with the expiration of small improvements that were passed in the 2009 Recovery Act.
SNAP benefits in Iowa have averaged about $116 a month per recipient — about $246 per household.* That works out to just about $1.30 per meal per person. Take a look below at what happens to that supplemental benefit when the modest improvement from the Recovery Act goes away today.
Source: Center on Budget and Policy Priorities, http://www.cbpp.org/cms/index.cfm?fa=view&id=3899
Our economy has not fully recovered from the Great Recession. And if it’s not enough that this Recovery Act improvement is expiring before the work is done, recognize that some in Congress see right now as a time to whack away further at SNAP benefits as a new Farm Bill is negotiated.
Now, we might not like to hear that some 13 percent of the state’s population is receiving food assistance. But you don’t address that issue by just cutting benefits to those people who are stuck in low-wage jobs, or are children, or are seniors, or are disabled.You need to make the jobs better, which starts with an increase in the minimum wage and pressure on Iowa businesses that pay low wages to do better. If we want a higher-road economy, we need to put a better foundation under it.
“American dream is fading for middle class”
I took this headline from the October 7 Cedar Rapids Gazette. You can imagine what the article says — that many Americans’ faith in a brighter tomorrow has been eroded.
What is not mentioned in the article are simple numbers — 50 percent of all income in the country goes to the top 10 percent and nearly half that goes to the top 1 percent. There is just not much income left for the vast majority of us.
Statistics on income distribution come from two sources, the Census and the Internal Revenue Service (IRS). Data from both agencies say about the same thing. We are a very unequal country and it is getting worse.
The newest data I found comes from a University of California-Berkeley economist, Emmanuel Saez, and available on his website. IRS data shows that the top 10 percent, families with more than $114,000 per year in income took home 50.4 percent of all income in U.S. in 2012. This is the highest percentage ever recorded for this group in a data series going back to 1917.
The top 1 percent — families above $394,000 per year in income — took home 23.5 percent of all income. Their share was slightly higher in the late 1920s, but not much.
If you want more bad news for the middle class, Saez’ analysis shows that the top 1 percent of families captured just over two-thirds of the overall growth of real incomes per family over the period 1993-2012. The 99 percent shared the remaining third. So why is that American Dream fading?
Posted by David Osterberg, Founding Director
This week, the U.S. House of Representatives will be considering severe cuts in the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. Already, SNAP benefits are scheduled to be cut in November because Recovery Act improvements will expire. Any discussion among Iowans about even more SNAP cuts should not miss this context:
— Food security remains a serious challenge. In Iowa, the latest report from USDA suggests this has risen by almost one-third in the last decade, from 9.1 percent in 2000-02 to 12.6 percent in 2010-12. (three-year averages) The increase is even greater proportionally for families in more severe situations. See this information from the Iowa Fiscal Partnership.
— SNAP use certainly has risen in the last several years — just as it was supposed to in tough times. We have not fully recovered from the Great Recession, but things are getting better and SNAP use will level off and decline as we recover. CBO predicts SNAP spending nationally to fall to 1995 levels by 2019. See this report from the Center on Budget and Policy Priorities.
— SNAP is only a supplemental benefit, but a critical one even at only about $1.25 per meal per person in Iowa. We show the share of Iowans who benefit from SNAP, by county and by congressional district, in maps on our Facebook page (compiled from Iowa Department of Human Services reports and U.S. Census data). By the numbers, here is the share of the population in each Iowa congressional district receiving food assistance in July:
2nd District — 15.8 percent; about 121,000 people.
3rd District — 14.7 percent, about 115,000 people.
4th District — 12 percent, about 91,000 people.
— The House bill would end categorical eligibility, which permits states to provide access to SNAP benefits for families just above the SNAP earnings limit of 130 percent of poverty. Iowa in 2008 used this option to expand gross income eligibility to 160 percent of poverty. An Iowa Fiscal Partnership policy brief last November noted this is particularly important for low-income working families with children, particularly when child care takes such a big bite out of their budgets.
This week we were treated (?) to the latest bizarre count provided by Governor Branstad’s administration on how many jobs he has created.
The Governor is claiming 160,600 jobs already created since he took office, and it’s nowhere close to reality, if for no reason other than the fact that he’s only wanted to count job gains and ignore the losses.* But even then, the number is inflated.
So, class, let’s all take out our abacus and our slide rule and try to come up with the same number. On second thought, let’s not. Let’s get past the politics on job numbers and just count ’em ourselves. A pencil will do.
As you’ll recall, the Governor promoted a goal of creating 200,000 jobs in five years. He took office in January 2011.
We start with 1,475,900 — the number of nonfarm jobs in Iowa in January 2011, according to Iowa Workforce Development. (Find IWD’s spreadsheet here.) The latest data, which are preliminary and might be adjusted, put that number at 1,530,300 as of June 2013. That’s a net increase of 54,400 jobs.
To reach 200,000 jobs by January 2016, the Governor’s goal, Iowa would have to add 4,700 jobs per month for the next 31 months.
IPP’s latest JobWatch report shows we have not kept that kind of pace in Iowa over the last decade. In 2013 the average net gain has been 2,400 a month, which is higher than usual.
Why not get rid of the political goal and focus on a realistic economic goal: the job growth we would need to bring down unemployment and keep pace with the growth of the labor market. As of June, we are still 55,100 jobs short of this basic threshold. But that’s a more manageable number than the 145,600 left to meet the Governor’s goal, and probably a more meaningful one.
Governors and state legislators have only so much impact on the overall health of a state economy to influence its job performance; there are much greater forces at work.
In the end, the issue for Iowa families is not as much a Governor’s goal as it is whether the economy is producing the number — and quality — of jobs necessary to maintain and improve all Iowans’ standard of living.
But we didn’t raise the issue about the job count. Others have. So as long as Iowans are going to be looking at it, we’ll help them to monitor it accurately.
* The Governor’s count of jobs already produced, 160,600, is far above even the number you’d accurately compute if you avoided counting job losses. Iowa Workforce Development has added a line on its nonfarm jobs spreadsheet leaving out the job losses and counting only gross jobs added, month by month, since January 2011. For what it’s worth, that number is 112,700 — about 48,000 behind what the Governor’s office was claiming Wednesday, and more than twice the actual net increase of 54,400.
Posted by Mike Owen, Executive Director
The figure practically screams at you, even when it’s not in all caps, when the conversation comes to corporate tax rates in Iowa.
Here’s the thing: It’s not a real number. Not really.
That is what is known as Iowa’s “top marginal rate” on corporate income tax. And it’s not a real number because it simply does not — cannot — reflect what a business pays on all its profits. Yet that is the implication when people (especially politicians) or corporations complain about it.
A top Iowa columnist, Todd Dorman of the Cedar Rapids Gazette, this week discussed the political battles over Iowa’s latest gigantic subsidies to Egyptian fertilizer company Orascom. In his piece he expressed a note of concern about the hyperbole in those battles. Then, he turned the discussion to Governor Branstad’s desire for cuts in corporate income taxes.
It is in that discussion where the hyperbole typically has been the strongest in Iowa. We are often told — as Dorman noted — that Iowa’s top corporate income tax rate is the nation’s highest. Note the emphasis added on “top.” More on that in a moment. Dorman also noted, accurately, that Iowa “has four brackets and a tangle of special interest credits.”
Because of the latter, any serious concern for our corporate friends should evaporate. Because they’re really being taken care of quite nicely, thank you, by their friends in the General Assembly and the Governor’s Office.
Now, about that “top rate.” It applies only to Iowa-taxable corporate profits above $250,000. Iowa doesn’t tax any profits from sales outside the state, so the rate doesn’t apply at all there, which for many businesses is a significant share of profits. For all taxable profits below $250,000, rates are lower — 6 percent on the first $25,000, 8 percent on the next $75,000 and 10 percent on the next $150,000.
Before these rates kick in, the business gets to deduct half its federal income tax from taxable income, and may have other deductions or ways to shelter income from state tax.
Then, after the rates are computed and the taxes determined, the tax credits enter the picture — and state revenues exit. The state just expanded the potential for those credits by $50 million, raising the cap on a select group of credits. In the case of the Research Activities Credit, these credits not only erase all tax liability, but offer state checks for the remaining amount of the credit. Through that program in 2012, Iowa paid out almost $33 million to 130 firms that paid no income tax, because those companies had more credits than tax liability.
And you can bet the corporate execs and their accountants fully understand all these nooks and crannies in our tax code. But if you want to give them a free million or so, they’ll take it. They are smart folks, and they have proven themselves to be more skilled negotiators than Iowa’s economic development moguls.
Want to talk reform? Then recognize the real problems — that we receive less in corporate tax than we used to, and that a lot of corporate tax is not collected because of the swiss-cheese nature of our tax code. That gives us all something to talk about.
Just be ready for the hyperbole from those who don’t want to change that part of our system.
Posted by Mike Owen, Executive Director
For more information about Iowa business taxes, see these Iowa Fiscal Partnership reports:
— “Reducing Iowa Commercial Property Taxes,” by Heather Milway and Peter Fisher, April 24, 2013.
— “Amid Plans to Relax Limits, Business Tax Credits Grow,” by Heather Gibney, April 16, 2013.
— “Corporate Taxes and State Economic Growth,” by Peter Fisher, revised April 2013.
— “A $40 Million Budget Hole: Persistent and Growing,” IFP backgrounder, February 25, 2013.
— “Tax Credit Reform Glass Half-Full? Maybe Some Moisture,” IFP backgrounder, revised March 23, 2010.
— “Single Factor to Consider,” IFP backgrounder, April 2, 2008.
So, McDonald’s and VISA have teamed up to tell low-wage workers how to make ends meet.
We have a proposal for McDonald’s and VISA: Leave economic and policy analysis to us, and we won’t compete with you on burgers and debt.
The McDonald’s/VISA plan is ironic on two fronts.
First, McDonald’s is an example of a low-wage employer — the folks who have profited mightily while their employees have not. In fact, the McDonald’s/VISA plan expects the worker to have two jobs, to make ends meet on an unrealistically low budget and have money left over — “spending money,” the plan happily calls it. That “spending money” would have to cover all food, among other things.
As Iowa Policy Project research has shown, the cost-of-living assumptions by McDonald’s are too low. A bare-bones budget for a single person in Iowa with no kids is just over $20,100 (2011 figures), requiring a job that pays about $24,000 before taxes. It assumes absolutely nothing for eating out (even at McDonald’s), let alone saving for school or retirement.
Second, McDonald’s/VISA doesn’t assume any cost of consumer credit for debt incurred, other than a car payment. VISA depends upon low- and middle-income folks taking on debt and seeing it pile up. Sometimes it’s consumer debt, but debt also can come from health-care out-of-pocket costs when your budget is on the edge. This is a very real cost for low- and middle-income families, and it can be made even worse with predatory lending practices that are dealt with feebly by state and federal lawmakers.
McDonald’s/VISA’s tortured compilation of expenses, it should be noted, comes fairly close to the one-person, total basic-needs budget we computed for 2011 — but a single person without kids would not come close to making that total budget by following the McDonald’s/VISA plan. Add child-related expenses, and — whoa! — there’s a fire in the kitchen!
McDonald’s and VISA also include some handy money-saving tips in their brochure to help low-wage workers get by, like riding your bike to work. How about these tips for saving money: Don’t eat out, and tear up your VISA card.
Click here to see how our researchers — Peter Fisher, Lily French and Noga O’Connor — came up with our numbers. Setting money aside for savings? Not possible. Health insurance at $20 a month? Actual insurance and out-of-pocket costs are far greater. The idea of having “spending money” left over? Laughable at best.
But none of this is funny. It illustrates that in the real world, choices for working people in Iowa are often about how to make ends meet when income falls short. And that is the situation for about three-fourths of single-parent families and about 23 percent of all families in our state.
Instead of assuring better ways to boost income, including a higher minimum wage, much of the public policy discussion is focused on cutting back supports such as food and energy assistance, not to mention Social Security, and holding down child-care assistance. We don’t seem to recognize the need for a living wage, however that may be computed. In the end, are we even willing to support a low-wage economy?
Posted by Mike Owen, Executive Director
It’s really quite amazing what kind of arguments people will use to beat up poor people.
Such an example is in the comments section of a story in today’s Des Moines Register about the debate over the Supplemental Nutrition Assistance Program, or SNAP, commonly known as Food Stamps.
One writer, in playing to SNAP opponents, is pushing the idea that two full-time jobs at minimum wage lift a family above poverty according to the current administration. In that case, the writer implies, food assistance isn’t needed.
Let’s take a look at the actual numbers and what they mean. It’s not heavy lifting.
Actually the federal poverty guidelines as established have been consistent — and consistently faulty — through several administrations. They are seriously outdated and underestimate what is necessary to make ends meet.
The official poverty level for a family of four in 2013 is $23,550. Does anyone seriously believe a family of four can make it on that kind of income? Rent, food, clothing, utilities — the basics of just getting by — cost more than that in real life.
The Iowa Policy Project has looked at this issue and is constantly updating a more reliable estimate of what it costs to get by — our report, “The Cost of Living in Iowa,” is available on our website with county-by-county numbers that reflect this cost for varying family sizes.
You can quickly see how two minimum-wage jobs don’t get the job done.
A bare-bones family budget for a four-person family in the Des Moines area is — conservatively — $37,886 for one working parent. (Table below). That assumes $3,157 per month for clothing, household expenses, food, health care, rent and utilities, and transportation. If a second parent works you add more transportation costs, plus child care, which becomes the second-largest expense.
Next, figure in taxes — yes, they pay taxes, and a lot as a share of their income — and you get what it takes for a family just to get by. So, this absolutely no-frills budget, with no savings for school or a home or retirement, not even burgers at McDonald’s, rings up at $39,122 before taxes for one working parent, $58,520 for two.
And that means jobs that pay $14.63 an hour for each working parent, or $19.56 if one works.
Yet, at the $7.25 minimum wage, two jobs would pay $30,160. So much for the argument that two minimum-wage jobs per family solve poverty.
This helps to show why the meager Food Stamp benefit of about $1.25 per person per meal is such an important support for Iowa’s low-income working families. But while we’re at it, we could start talking about a higher minimum wage. Another day, perhaps.
Posted by Mike Owen, Executive Director