The weekend Iowans fool themselves

Think about it: How often do you rush off to a ‘7-percent off’ sale?

It’s here again — the weekend when Iowans buy into some really bad political spin, but leave happy about it because they don’t pay tax on the purchase.

Today and Saturday are the dates of Iowa’s sales tax holiday, which we have noted many times — including here, here and here — is a shopping bag full of nonsense.

As IPP’s Peter Fisher noted in 2014, the third link above, “Who’s to say a retailer, with this officially sanctioned ‘holiday’ marketing, won’t bump prices by 10 percent or call off a 20 Percent Off sale that might have been in place?” Instead of revenue for schools, it’s a recipe for a retailer’s windfall.

Iowa media quite often play along, with rarely a discouraging word challenging the notion of the break, questioning whether any break actually results, and, importantly, how much it costs public services. (It was $1.6 million in its first year, 2000, and by 2015 the break was valued at $3.6 million lost to services.)

Neither does the Iowa Department of Revenue shed light on these issues, which are at least as important as a list it offers of what you can and cannot buy tax-exempt on these hallowed anti-tax days.

Certainly, the sales tax is one that disproportionately hits lower-income people harder than high-income people. The evidence is clear on that. And reducing the impact of the sales tax year-round would be a sensible step if paired with an income-tax increase affecting higher-income people — same revenue, fairer approach.

But this break goes to anyone, so those very wealthy Iowans who are the largest beneficiaries of the income-tax cuts passed in 2018 also get an extra break here.

And there we have the two largest problems with Iowa tax policy: It is inequitable, and it is based on political spin that ultimately harms the public services we depend upon.
Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@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.

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