Posted tagged ‘Mike Owen’

Start with ‘zero’ on credits

March 11, 2015

It was​ fascinating Tuesday to see Iowa lawmakers talking about zero-based budgeting — starting every budget from scratch — when they have refused to do the same with tax credits.

Spending on tax credits — including millions to companies that don’t pay any state income tax — just keeps going on and on.

And on.

And on.

Companies basically get to appropriate state money to themselves. Quite a deal if you can get it.

If the state were to sunset business tax credits, as recommended in 2010 by a special governor-appointed Tax Credit Review Panel, lawmakers could review each one and decide which are actually producing a public benefit, whether any of them are money well spent. If so, they could renew the credit. If not, we could put our resources where they make more sense for all Iowans.

Maybe a part-time legislature could start with a zero base on tax credits before we talk about it for an entire state budget.

Owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

What happens at $8.75 in Iowa?

February 24, 2015

There are serious competing ideas in Iowa about the minimum wage — whether to raise it, and by how much. Iowa lawmakers are currently discussing the issue; the Governor is staying out of it.

What cannot be denied is that the minimum wage is not enough — not nearly enough — to get by, and that regardless of political spin to the contrary, there are many families in Iowa whose household budgets depend greatly on that wage. Any increase will benefit a large number of Iowa working families.

We have illustrated with data from the Economic Policy Institute (EPI) how an increase to $10.10 from the current $7.25 would affect Iowans. That two-page piece is here. That proposal would raise the hourly wage for an estimated 306,000 Iowans (216,000 directly, and 90,000 indirectly*).

A proposal in the Iowa Senate would raise the wage by a smaller amount, to $8.75. Again with analysis from EPI, below is what could be expected if the wage were raised to $8.75 in July 2016. Compared to the current $7.25, the new wage would affect:

•   12 percent of Iowa workers
•   112,000 Iowa workers directly
•   69,000 Iowa workers indirectly*
•   181,000 Iowa workers in total — about 3 1/2 times the number of people working at the current minimum.

150205-MWgraphic

More impacts are shown in the adjacent graphic. EPI projects increased wages of $147 million and increased economic activity (GDP) of $93 million.

There are those who dismiss the minimum wage as a minor issue. They are wrong, and the numbers show this.

* Workers affected indirectly have wages slightly above the proposed minimum and will be affected as pay scales adjust.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

See ya later, Gator: Civics lesson from bowl game

December 31, 2014

ipp-kinnick6Of course we’re all excited that the Iowa Hawkeyes will be playing Jan. 2 against Tennessee in the — uh, what’s the name of that bowl again?

It has something to do with tax preparation. (No royalties are being paid for publication of this message, so no need to repeat it.) So for now, let’s just call it the Pay Your Taxes Bowl.

Or, to recognize what we do by preparing and paying our taxes, we could make it the Feed the Hungry Bowl, the Educate the Children Bowl, the Fix the Highways Bowl, or the Clean the Air and Water Bowl.

In years past, most bowl games promoted a tradition, or an image, related to their locale. This game in Jacksonville, Florida, used to be called the Gator Bowl, and that was the name of the stadium. Now it’s played in a rebuilt stadium named for a bank.

The Gator Bowl has a storied past, including a good game in 1983 between the Iowa Hawkeyes and the Florida Gators, who won 14-6.

Even the Beatles played there once — though it was for a concert, not a gridiron battle with the Beach Boys — and that seems more interesting than the heavy-handed advertising that dominates these games now. Maybe the Fab Four Bowl? Strawberry Fields Bowl? Hold Your Hand Bowl?

There was a time when the Orange Bowl wasn’t connected to the name of a delivery service or a credit card company. There was a Citrus Bowl in Florida and a Peach Bowl in Georgia. I remember going to the Alamo Bowl once, happy to see the name bound to the enduring history of San Antonio, with no connection to rental cars.

Almost all bowls now feature a corporate sponsor’s name, so it may be in the nature of things that when many Iowa fans remember “The Catch” by Warren Holloway to beat LSU as the clock expired, they involuntarily associate it with the name of a credit card.

Still, we should acknowledge the irony that with the corporatization of all that is good, like football bowl games, at least one bowl game is associated with paying taxes instead of avoiding them.

Just understand: Some of us will still think of it as the Gator Bowl.

Go Hawks!

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

Editor’s Note: This piece was published as an Iowa View in the Dec. 28, 2014, Des Moines Register

Leveling the playing field

December 11, 2014

Small business owners get it: They follow the rules, but preferential treatment for giant companies puts them at a disadvantage.

Case in point: Lora Fraracci, who had an excellent guest opinion in today’s Cedar Rapids Gazette about practices big companies use to avoid paying U.S. taxes. The problem is not exclusively an issue with the lax U.S. tax code. It is a big problem at the state level as well.

Ms. Fraracci runs a residential and commercial cleaning business. As she noted:

“As a small-business owner in Des Moines, I play by the rules and pay my taxes to support our American economy. I create jobs that will continue to support our local economy. When the playing field is so uneven it makes it hard to realize this dream.”

The issue has been receiving some national attention, but many may not realize the prevalence of this problem and its extension to state taxes. While Ms. Fraracci and other small businesses, or Iowa focused businesses, follow the rules, large companies they may serve can find a way to either (1) avoid the rules, or (2) block stronger rules.

The Iowa Fiscal Partnership has written about these issues for some time, and the reports are on our website.

The biggest Iowa breaks come in two ways: tax loopholes and tax credits.

Tax loopholes have been estimated to cost the state between $60 million and $100 million a year. Loosely written law is an invitation to big companies’ lawyers and accountants to find ways to lower their firms’ taxes. Multistate firms can shift profits to tax-haven states and avoid taxes they otherwise would be paying in Iowa. That creates the uneven playing field Ms. Fraracci sees.

Iowa could fix this by adopting something called “combined reporting,” which the business lobby has fought tooth and nail when proposed in the past by Governors Tom Vilsack and Chet Culver. Many states — including almost all our neighbors (Illinois, Wisconsin, Minnesota, Kansas and Nebraska) — already do this. See our 2007 report, which remains relevant because Iowa has refused to act.

Tax credits are particularly costly, rarely reviewed with any sense that they will be reformed. This is illustrated best with the Research Activities Credit, which provides a refundable credit to big companies to do something they are likely to anyway: research to keep their businesses relevant and competitive.

In 2013, that credit cost $53 million, with $36 million of that going to companies that paid no state income tax in Iowa. The default position must be that this is wasted money, because it is never reviewed in the regular budget process the way other spending is examined every year — on schools, law enforcement, worker protection and environmental quality. In Iowa, spending on tax credits is spending on autopilot.

Read here about Iowa’s accountability gap on tax-credit spending.

Looking ahead, as a new legislative session approaches and we hear repeatedly that things are tight, keep these points in mind to better understand the real fiscal picture facing Iowa. The more small-business owners understand this, the more likely pressure can build for real reform.

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

The case for Governor Branstad’s minimum wage increase

November 14, 2014

Election Night 2014 — the hours that established why Governor Terry Branstad should push for an increase in the state minimum wage.

At first blush, this might not seem obvious. It was a big Republican night, and support of the minimum wage is not a marquee issue for Republicans.

On Election Night, a minimum-wage critic won the U.S. Senate seat of one of the nation’s most high-profile and ardent supporters of a minimum-wage increase, Iowa’s Tom Harkin, and Republicans took control of that chamber. Over in the House, Republicans flipped one seat and now hold three of Iowa’s four, along with a historically overwhelming majority that makes the minimum-wage increase sought by President Obama highly unlikely.

This turns the focus to the Iowa Statehouse, where the power structure remains effectively the same: Republican governor, narrowly Democratic Senate, slightly stronger Republican majority in the House.

With little change in Des Moines, why would passage be more likely now?

For one thing, we have gone one more year without an increase. It has been almost seven years now at $7.25; it is only a matter of time — and we may be there — when Iowa reaches a tipping point where inertia succumbs to an increase in the minimum wage.

For another, the near-certainty that it will not pass in Washington erodes pleas to wait for the feds. Recall that Iowa stopped waiting in 2007, passing the $7.25 wage that took effect in January 2008, almost 19 months ahead of the federal $7.25.

Finally, the tipping point noted above may be signaled in state referendum victories on Election Night for minimum-wage forces in two neighboring “red” states — Nebraska and South Dakota — indicating the time is right politically. Of the states bordering Iowa, only Wisconsin is stuck with us at $7.25.

State minimum wages higher than U.S. minimum on Jan. 1, 2015

State minimum wages higher than U.S. minimum on Jan. 1, 2015 (National Conference of State Legislatures)

An increase would be popular in Iowa. A recent poll showed 53 percent support for an increase to $10.10 an hour.[i] No politician in either party will be disadvantaged in 2016 having supported a minimum wage increase.

On the merits, it is well established that a minimum-wage increase is overdue. It comes nowhere close to a family-supporting income, and it has not kept pace with rising costs for almost seven years. Families depending on minimum-wage income have not seen lower costs of food, fuel, housing, clothing and health care in those years. Passing it now would mean:

  • Fewer Iowans in poverty.
  • A boost to local and state economies as families have more to spend.
  • A fiscal benefit to the state as less is needed to support extremely low-income working families.
  • More resources to support stronger work-support programs to point low-wage workers on a path to the middle class.

In the past, Governor Branstad has made it clear the issue was not his priority but he has not ruled it out.[ii]

For all of these reasons, the time is right for Governor Branstad to move ahead. It’s the right thing to do, and the ball is in his court.

[i] http://globegazette.com/news/iowa/poll-majority-of-iowans-favor-raising-minimum-wage/article_1b688a49-214b-5688-bfff-9e74ead757bd.html

[ii] http://whotv.com/2014/01/31/minimum-wage-branstad-hasnt-ruled-out-increase/

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

Job 1 for Day 1 — putting Iowa families first

November 6, 2014

As election dust settles, priorities remain clear for Iowa families

Now that the votes are counted, the real work begins. Job 1? It could be any of a number of areas where solid research and analysis have shown better public policy could make a difference for a more prosperous, healthier Iowa. Take a step back from the TV ads and “gotcha” politics and these issues come clearly in focus.

In Iowa, research shows solid approaches to economic prosperity for working families include:

In Iowa, research shows a fiscally responsible approach to both find revenues and do better with what we have includes:

  • Stopping tax giveaways to companies that pay no income tax — which occurs at a cost of between $32 million and $45 million a year through one research subsidy program alone, even though there is nothing to show this spending boosts the Iowa economy or produces activity that would not occur anyway. http://www.iowafiscal.org/big-money-big-companies-whose-benefit/
  • Reining in unnecessary “tax expenditures” — tax breaks, tax credits and other spending done through the tax code — could bring in tens or hundreds of millions of dollars for public services. A five-year sunset on all tax credits would force lawmakers to review and formally pass renewals of this kind of spending, now on autopilot. The last attempt at real reform fell woefully short. http://www.iowafiscal.org/tax-credit-reform-glass-half-full-maybe-some-moisture/
  • Plugging tax loopholes — a $60 to $100 million problem — would pay for a 2 or 3 percent annual increase in state per-pupil funding of K-12 schools. Twenty-three states, including 4 of 6 Iowa neighbors, don’t permit multistate corporations to shift profits out of state to avoid Iowa income tax and contribute their fair share to local education and other state services. http://iowapolicypoints.org/2013/05/22/will-outrage-translate-into-policy/
  • Reforming TIF — tax-increment financing, which is overused and often abused by cities around the state, has caught lawmakers’ attention in the past and should again. Like many tools that provide subsidies to private companies and developers, it should be redesigned to assure subsidies only go to projects with a public benefit and only where the project could not otherwise occur. Further, it should be designed to assure that only the taxpayers who benefit are the ones footing the bill, which is a problem with current TIF practice. http://www.iowafiscal.org/category/research/taxes/tax-increment-financing-tif/

In Iowa, research shows a healthy environment and smart energy choices for Iowa’s future includes:

  • Putting teeth into pollution law — which means reforms in Iowa’s Nutrient Reduction Strategy to eliminate pollution in waterways. http://www.iowapolicyproject.org/2014Research/140717-nutrient.html
  • Allowing local government to regulate frac sand mining — When it comes to cigarettes, guns and large hog facilities the Iowa Legislature took away the right of local government to listen to citizen desires. The General Assembly and the Governor should let democracy thrive and not take away local control of sand mining.
  • Encouraging more use of solar electricity in Iowa — Jobs are created while we confront climate change if we build better solar policy in Iowa. http://www.iowapolicyproject.org/110325-solar-release.html
  • Promoting local food and good food choices with school gardens — and a pilot project to offer stipends to Iowa school districts could encourage both learning and better nutrition. http://www.iowapolicyproject.org/2014Research/140514-school_gardens.html

None of these issues are new and it’s not an exhaustive list. But these were big issues for our state before the election and remain so, no matter who is in charge.

Together, we can build on the solid research cited above and lay the foundation for better public policy to support those priorities.

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

Bad math, good math — and Iowa jobs

October 22, 2014

Those 31 points the Iowa Hawkeyes scored last Saturday were something, huh?

It sure feels better when you don’t include Maryland’s 38 points. And that’s the way Governor Branstad counts jobs.

Enough with the bad math, and let’s talk about those Iowa jobs.

The actual job performance of Iowa’s economy is pretty simple to compute from the state’s official spreadsheet, which shows seasonally adjusted, nonfarm jobs, month by month and sector by sector, back to January 2008. You can find that sheet here.

Doing it wrong

As we have pointed out in the past on this blog, the Branstad administration chose to edit the official spreadsheet by adding a special line that only shows increases. No job losses are counted. Ask anyone who’s lost a job whether that sounds reasonable. But when you’ve promised 200,000 jobs in five years, you have to get there somehow.

A snapshot of the key but distorted line is highlighted in the photo at right. Basic RGBThat line, “Gross Over-the-month Employment Gains,” ignores the monthly performance of any job sector showing a decrease. Instead, the increases in the other job sectors each month are added, and the total inserted into the “Gross Gains” total compiled from previous months during the Governor’s current term. Twisting the numbers this way, the Governor has reached 156,500 — almost twice the actual increase since he took office.

In September, the Governor’s math turns a 1,300-increase month into 4,900. A happy result, but false.

Doing it right

The Iowa Policy Project has put out a monthly analysis of state job numbers for 11 years now. And as we point out in our latest Iowa JobWatch, not only is the Governor’s number exaggerated, but there is a better approach that does not tie him to his ambitious and apparently unreachable goal.

If you want to measure progress, you measure everything. And that’s simple: How many jobs were there in the base month, and how many are there in the latest one?

So, for the real math as of September 2014:
— Since the Governor took office in January 2011, Iowa has added 80,000 jobs.
— The pace of job growth in those 44 months has been about 1,800 jobs per month.
— To reach the Governor’s goal of 200,000 by January 2016, the next 16 months would have to show an average monthly increase of 7,500.

More importantly, the best way to look at job growth is to remove the artificial political frame and examine it the way economists would. The Economic Policy Institute came up with a sensible measure, from a relevant starting place: the start of the last recession. Look at the job change from the start of the last recession and compute what would be needed to (1) make up lost jobs and (2) keep up with increased population, which for Iowa is about a 5 percent increase.

In this approach, we can see that as of September 2014:
— Iowa showed a net gain of 31,300 net jobs since December 2007.
— To keep up with population growth, Iowa needed a net gain of 76,800 jobs from the December 2007 level of 1,524,900.
— Iowa has a jobs deficit of 45,500.

Basic RGB

The Governor will do what the Governor wants to do. But that doesn’t mean the rest of the state or its policymakers should take their eye off what’s really happening in our economy.
Owen-2013-57
Posted by Mike Owen, Executive Director


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