Coupling — singling out the winners

And guess who they are? Not schools

We always seem to have money for a business tax break, but not for schools. Last year legislators approved just a 1.25 percent increase for schools, a move made a little more responsible by the addition of $56 million in one-time money for this fiscal year. But the Governor vetoed the $56 million because it was one-time money.

Fast forward to this week: the Legislature just approved $98 million in retroactive tax breaks, most of it for businesses, coming out of this year’s budget surplus — the same source of one-time money that the Governor claimed couldn’t be used for schools. The Governor has said he agrees with the tax breaks.

The $98 million would be the cost of “coupling,” which means the state would go along with selected changes in the federal tax code. It would do some sensible things, but others — not so much, and not for the reasons being promoted.

In the end, this is just one more giveaway to business. Cynically, one legislator pronounced this as a move for “fair tax policy.”

In fact, coupling was agreed to as a condition to set school funding already 13 months past the legal deadline. Those talks may now resume.

There has not been a move to enhance fairness for working families in the Iowa tax code since passage of an expanded Earned Income Tax Credit in 2013, and all general changes in Iowa’s income-tax structure over the last 20 years have been heavily weighted toward the wealthiest.

As to the merits of the “tax coupling” legislation, the spin runs very hot and heavy.

One senator claimed this bill is designed to let taxpayers “make the decision on where to best invest their dollars.” No, it’s not.

Businesses already made their decisions last year on where best to invest their dollars, without benefit of the tax break. All the bill does is give them a subsidy after the fact for decisions already made on their own merits, rather than for tax reasons.

We know this because the federal changes, on which the new state breaks are based, were not approved until December of 2015. If any small business made a decision to buy a big piece of equipment in, say, April or October of last year, they could not have assumed they would have a state tax break for it. The funds for the state break were not budgeted. Governor Branstad didn’t plan on it last year, and neither did the House or Senate.

Perhaps the most disingenuous defense of the coupling bill is that it is needed to help thousands of public school teachers who have to purchase their own supplies. The most any teacher could get out of this bill is $22. Is there any teacher in Iowa who would prefer $22 to adequate funding of schools?

We elect a Legislature to make choices with public money about spending on public priorities. It’s part of being a statewide community.

Now it’s $98 million for “coupling.” It’s not hard to see that education could have had this funding all along as part of the regular budget formula. And $98 million is equivalent to about 2 percent in supplemental state aid for schools, which has been held below 2 percent on average over the last six years.

Once again, we see the ascendancy of business tax breaks above what has long received lip service as the first priority of state government: education.

Posted by Mike Owen and Peter Fisher

Owen-2013-57Mike Owen is executive director of the Iowa Policy Project. A former journalist, he has been a member of the West Branch Board of Education since 2006. mikeowen@iowapolicyproject.org

2010-PFw5464Peter Fisher is research director of the Iowa Policy Project. He is professor emeritus in the University of Iowa School of Urban and Regional Planning. pfisher@iowapolicyproject.org

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s