Posted tagged ‘Mike Owen’

Let’s be done with Iowa’s fake job number

March 18, 2014

For some time now, the Iowa Policy Project and others have noted a bogus statistic that has been inserted into official jobs data provided by Iowa Workforce Development (IWD).

It just keeps getting better — the fake statistic — because it is designed to work that way.

“Gross Over-the-month Employment Gains” is an extra line that has been added to IWD’s seasonally adjusted, nonfarm jobs spreadsheet, which provides month-by-month data by job sector, back to January 2008.

Basic RGB

Below the standard table of rows and columns is the special line, with numbers reflecting the gains-only count since January 2011, when Governor Branstad took office. Construction up 200 but manufacturing down 400? No problem. Ignore the manufacturing losses and call it a gain of 200. That is exactly how this method treats job counts.

And now there’s a new wrinkle. Previously, IWD only showed what the count looked like for each month, with no overall total. You had to add the numbers yourself.

Beginning with the latest report, the ever-helpful IWD now takes care of that for you, or for whomever would want the meaningless number. With the latest report, IWD makes it a cumulative count.

Our experience with IWD staff is that they are professionals. No doubt they cringe every time that number comes out of the agency — whoever ordered them to compile it.

But no doubt the Governor is pleased. While the number is a total distortion of reality, it shows him close to the pace he would need after three years (120,000) to get to his magic goal of 200,000 jobs in five years. Kind of like winning a basketball game by shutting off the opponent’s side of the scoreboard, but, whatever it takes, right?

So, in case you’re interested, Iowa’s economy has created a net increase of just under 61,000 jobs since the Governor took office — about half of what he’d need to be on pace toward his goal. For a real analysis of Iowa’s job picture, see IPP’s monthly Iowa JobWatch report, or our annual report on The State of Working Iowa.

140318-jobsat36months2Now it’s one thing if the Governor’s campaign wants to peddle silly job numbers under its own letterhead. But it is wrong — flat out wrong — for official data to be presented by IWD with what amounts to a political campaign line for the Governor.

For those of us engaged in nonpartisan research and analysis, the political tainting of IWD reports is a great disappointment. Like us, IWD should be trying to determine and illustrate the actual job picture facing our state, so policy makers can make decisions in that light.

IWD and all state agencies must be neutral players if their mission is to serve all Iowans — not someone’s political agenda.

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

Two numbers say so much

March 6, 2014

Two numbers say so much: 140 and $36 million.

Last year, 140 companies paid no income taxes in Iowa but — through the tax code — received $36 million in research checks.

Those two numbers alone tell us two things: We have a problem with transparency, and we have a problem setting priorities.

We know those two numbers because Iowa’s Department of Revenue is required every February to report on the use of the state’s Research Activities Credit.

We don’t know enough about what’s behind those two numbers — the problem of transparency. As it’s public money, the assumption should be that we are owed full information about where every dollar is spent (a case made well by The Des Moines Register in a recent editorial). Cities, schools and counties are required to disclose this routinely.

In fairness, some lawmakers worked hard in 2009 to assure the transparency that we do have, passing a good law that required the annual reports. Before that, we had even less information. Big business fought hard to stop the law, and failed. And because we have the law, we can make several noteworthy observations that are detailed in this Iowa Fiscal Partnership backgrounder, and get some insights on who benefits, as in the table below.

Table3-RACrecipients-w

But the annual reports do not tell us — or indicate with certainty — which companies receive the benefit as checks, how much each receives or how the money is used. There is no evidence of jobs created. There is no evidence of need or of public benefit, or return on the public investment.

There is no point where we say, “Enough already. You know, Company X, you had $200 million in profits last year — we don’t really think your shareholders need Iowa taxpayers’ help when our schools can’t keep up with costs and our city water systems need updates and our roads have potholes. And, by the way, your company and your employees are better off if we take care of those priorities before we give money to you.”

This exposes the problem with budget priorities: This spending is done outside the budget process. Spending on the RAC is decided before the Legislature even convenes. It’s automatic. The decision has already been made for 2015, and 2016, and so on, and we don’t even know for sure how much it will cost — though the Revenue Department projects it to grow precipitously.

State law provides that companies are entitled to that money regardless of any other pressures on state budget choices — including cuts to education. Example: In 2013, Iowa spent that $36 million to help companies that contributed no income tax, but for the current fiscal year that started in July 2013, the state reneged on its commitment to the school funding formula. The state fell more than $60 million short of its share, leaving property taxpayers to pay it — in the same year, by the way, that legislators boasted about property-tax reform.

I think I know where we could have found $36 million of that lost school funding.

A special state panel that reviewed all Iowa tax credits in 2009 singled out the so-called “refundability” of the RAC as a special problem. It recommended eliminating refundability for big companies, which have dominated the spending on this credit. And it also recommended putting a sunset — an automatic elimination — on all tax credits after five years. To keep them going, the Legislature would actually have to take a vote on them. That is accountability.

As it stands, our Legislature does not touch this issue. Meanwhile, big and immensely profitable companies are sucking dollars away from our local schools, state universities, community colleges, local police, county mental health services, environmental quality programs and enforcement, wage and hour enforcement … well, you get the idea.

That is the budget choice being made, because our state is happily spending on autopilot with no proof of a public benefit.

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

A taste of transparency

February 11, 2014

This week we will get a taste of what transparency could look like for the hundreds of millions of dollars that Iowa spends through the tax code.

We’ll only get a taste, to be sure, as what we’ll see won’t be enough. But, thanks to a law that passed against difficult and powerful lobbying interests in 2009, we do get that taste — a glimpse into who benefits from Iowa’s largest and most generous business tax credit.

It’s the Research Activities Credit (RAC), a costly little gem that has provided big companies some big checks from the state — in some cases even when they pay nothing in income tax. The Iowa Department of Revenue projects the cost of this credit to grow by more than half in the next five years, from $52.4 million to $80.3 million.[1]

projected growth of RACCould this be a shrewd investment for the state? Not likely, or at least that must be the presumption, as the beneficiaries have neither shown nor had to show the state’s real taxpayers what they get in return for the giveaway. Click here for a look at the recent history on this credit.

Projected RAC costs tableThe economic development gurus defend the RAC with little more than a “trust us” argument, which of course is not a strong enough argument for public schools, or state universities, or community colleges, or cities with law enforcement and infrastructure challenges, or counties with mental health services and emergency response challenges.

And the costs just keep rising for the RAC and many other business tax credits, with virtually no public accountability. What little that is available will come in the Department of Revenue report that is due yet this week. It will show the total amount of claims, the total amount paid as checks to companies that do not pay state income tax, and will identify companies with over half-a-million dollars in claims. Stay tuned.

[1] Iowa Department of Revenue, Tax Credits Contingent Liabilities Report, December 2013, http://www.iowa.gov/tax/taxlaw/1213RECReport.pdf

Mike OwenPosted by Mike Owen, Executive Director

Watch tax spending more closely

February 4, 2014

Iowa is behind — not that we didn’t already know that.

A new report by the Center on Budget and Policy Priorities (CBPP) examines several aspects of what states do in budget planning. Particularly noteworthy in the report for Iowa is its poor attention to the impact of tax expenditures — spending through the tax code. When we have a tax break on the books, such as a credit or exemption, it has an impact on the budget bottom line the same as if the lost revenues were spent on the other side of the ledger.

Most of this spending, as the Iowa Fiscal Partnership has shown over the years, is on autopilot. These breaks exist year to year, never requiring renewal — unlike the kind of spending we do through direct appropriations, where critical services are subjected to annual scrutiny to exist or not for another year.

Here’s why it matters, according to the executive summary of the CBPP report:

When recessions occur, states must scrutinize all forms of spending.  An important tool for this is oversight of various tax expenditures (tax credits, deductions, and exemptions that reduce state revenue), which in many ways function as spending through the tax code. This will enable states to make sound choices between the most essential tax expenditures and those the state can forgo. For example, states can regularly publish tax expenditure reports that list each tax break and its cost. And states can enact sunset provisions so that tax breaks expire in a specified number of years unless policymakers choose to extend them.

The problem in Iowa is not a lack of analysis or data. The Iowa Department of Revenue (DOR) has produced solid tax expenditure studies in 2000, 2005 and 2010. They are found here on the DOR website. And there is considerable information outside those formal studies that illustrate overall costs — primarily a so-called “tax credit contingent liabilities report” offered three-to-four times a year by DOR for use by the Revenue Estimating Conference. Furthermore, a number of important tax expenditures have been the subject of in-depth reports to the legislative committee charged with reviewing tax credits.

So in what way is Iowa behind the curve? The CBPP report lists 10 ways states can better budget for the future, including one on the tax-expenditure oversight issue:

Oversight of tax expenditures:  expiration dates for tax expenditures after a set number of years to subject them to regular scrutiny of their cost and effectiveness, in addition to tax expenditure reports that list the costs of individual tax breaks.

Such expiration dates are called “sunsets.” A special Tax Credit Review Panel appointed by then-Governor Culver in the wake of the 2009 film-credit scandal produced a set of strong recommendations for reform, among them a five-year sunset on all credits. This proposal was ignored.

Furthermore, a review of tax credits on a five-year rotation set up by lawmakers in response to that panel’s recommendations has produced no apparent policy change; this perhaps is not surprising since the committee that reviews the credits has not issued findings that the credits are meeting the intent of policy, or producing a return on the taxpayers’ investment.

The bottom line is this: Unless tax expenditures sunset, there is little incentive for legislative committees to take evaluations seriously.

Mike OwenPosted by Mike Owen, Executive Director

A minimum wage increase for Iowa?

December 18, 2013

The question is an old one. Sadly.

Every few years, the pressure builds enough that we finally get a discussion about raising the minimum wage. We seem to finally be reaching that stage. The president supports a $10.10 minimum, up from the current and outdated $7.25 per hour, as Senate Labor Chair Tom Harkin of Iowa proposed last February. And it’s grown in popularity, if not in paychecks of the working poor.

A Washington Post poll finds two-thirds of Americans support a minimum wage increase, and a firm majority — 57 percent — believe federal policy should be used to reduce the wealth gap between rich and poor.

Many forget that in Iowa, the pressure has been building longer than it has nationally, as IPP’s Heather Gibney pointed out last March. Yet there’s no assurance we’ll hear much about it in a promised short session of the Iowa Legislature in 2014.

Iowa actually beat the feds to the punch in 2007, raising the state’s minimum wage to $7.25 in January 2008, a full year and a half ahead of the federal wage increase. That means six full years have eroded the buying power of those at the minimum wage — effectively, a 60-cents-per-hour wage cut.

Basic RGBThe Cedar Rapids Gazette, while not totally sold on the merits many economists see in a minimum wage increase, argued for an increase in an editorial today. Wrote the Gazette:

“The ultimate goal should be to make the minimum wage less political and more predictable, both for workers and for businesses owners charting costs. Neither should have to guess which way the political winds and whims will blow their livelihood.”

Given the lack of assurance of this being addressed in Washington, and even less of it being done in a nonpolitical manner, raising and indexing the wage to inflation as the Gazette suggests would be an effective way of ending these periodic squabbles that leave pay for the working poor to “political winds and whims.” Can our Governor and Legislature begin to look at the issue that way?

Mike OwenPosted by Mike Owen, Executive Director

A new look for the first of the month

November 1, 2013

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.

 SNAPmonthlyCut-1-31-13

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.

Mike OwenPosted by Mike Owen, Executive Director

* Iowa Department of Human Services, Food Assistance Program State Summary for September 2013, Report Series F-1.

Blowhards can’t shut all of us down

October 1, 2013

GEDSC DIGITAL CAMERA

For a couple of weeks, I’d planned to take today off. Doctor appointment, work in a few errands and odd jobs around the house, etc.

Now, wild Tea Partiers couldn’t keep me away.

No way I’m going to choose to take a day off when people I know are being forced to stay home, all for the sake of politics, and bad politics at that.

The shutdown of the federal government is an affront to self-government, to the concept of democracy in a republic.

Worse, it will have a real impact on real people. Not just the employees, some of whom are friends who live in my community — West Branch, the birthplace of President Herbert Hoover. Some are employees of the National Park Service, running and maintaining a national park; some work at the Hoover Presidential Library-Museum, part of the National Archives. But it also affects the rest of us. We all benefit from their work, some more directly than others.

Just yesterday on my way to work, I passed one of them working on railings of a bridge that children in our community cross on the way to school. She and some of her co-workers have kids in our schools, or have in the past. Wonder if she’ll be working tomorrow, I thought.

The national parks are, as a friend of mine pointed out this morning, some of the best places our country has to offer and we employ people to maintain them, preserve them and share the stories they hold. These federal employees — like those who preserve our physical and financial security — are routinely assailed by some who portray them as unnecessary and wasteful, among other things.

The portrayals say more about the portrayers than about their targets, the people we hire to do what needs doing.

And what they do needs doing, in practical terms certainly, but also because they remind us more of what unites us than of what divides us.

OK, now I’m off to my doctor’s appointment. But I’ll be back to work afterward, because blowhards in Washington can’t shut all of us down.

Posted by Mike Owen, Executive Director

Why, again, would it make sense to cut SNAP?

September 17, 2013
Mike Owen

Mike Owen

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:

1st District — 12.3 percent; about 94,000 people.
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.
Here’s the county-by-county look (note, the golder and greener a county, the greater percentage of the population receives food assistance):
CI-MapTemplate

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.

SNAP is a work support. Contrary to the claims of detractors, SNAP is one of those benefits that enable people to take jobs they otherwise would not be able to accept. When we have an economy that is producing jobs that pay below what is needed to get by, these work support programs are critical. We have illustrated the issues there with our Cost of Living in Iowa research, where we have demonstrated that even at median wage, many Iowa families would not get by were it not for work support programs.
Posted by Mike Owen, Executive Director

The problem with political goals on jobs

July 26, 2013
Mike Owen

Mike Owen

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.

130719-NF-goalsIPP’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

Hyperbole Alert: The drumbeat to cut corporate taxes in Iowa

July 24, 2013
Mike Owen

Mike Owen

TWELVE PERCENT!

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.


Follow

Get every new post delivered to your Inbox.

Join 25 other followers