Differences in Disaster: A series of observations

Providing the same resources to communities regardless of their ability and opportunity to recover results in inequitable outcomes.

Part 3: It all comes down to equity

Public policy to deal with flooding involves a lot of big-ticket items that carry big implications for the future of communities that by choice or by economic necessity stand in harm’s way.

This issue all comes down to one of equity and equality.

Matt Kinshella graphic, source info below*

Equality would ensure every community is provided the same resources and consideration regardless of their characteristics. But, as we have discussed, providing the same resources to a community that has less opportunity and ability to recover as one that is well positioned to do so results in the outcomes we have seen: Wealthy communities become wealthier while poorer communities fall further and further behind.

Equity calls for alleviating these disparities to create the opportunity for equal recovery rates and outcomes among disparate communities.

How do you do that? The following suggestions are a few items that will work toward leveling the playing field.

      • “Rebalance” mitigation efforts with an emphasis on community impact and vulnerability rather than up-front economic loss, the latter putting higher-value properties ahead of those less able to cope on their own.
      • Put more flexibility in FEMA guidelines to ease community burdens and allow for a creative use of funds.
      • Better direct Community Block Development Grant funds to the best place for mitigation efforts — not necessarily within the damage area, but outside if needed. Flood mitigation is best placed upstream.
      • Keep state funds flowing pending the arrival federal aid, which might be delayed after a federal disaster is declared and Iowa stops processing and paying disaster claims.

While these suggestions won’t fix everything, they offer a start to a discussion that needs to start now. Policy makers and recovery agents must take into account social vulnerability and community impacts to a greater extent than they already do if we are to break the downward spiral poor communities find themselves in following disasters.

Previous:
Part 1: Flooding hits different families differently
Part 2: Flood mitigation protects different families differently

Joseph Wilensky is a Master’s Degree candidate in the University of Iowa School of Urban and Regional Planning. Visit the Iowa Policy Project website for his December 2019 report, Flooding and Inequity: Policy Responses on the Front Line.

* Graphic credit: Matt Kinshella; culturalorganizing.org blog, “The problem with that equity-vs.equality graphic you’re using.” Copyright Paul Kuttner

Differences in disaster: A series of observations

A benefit-cost analysis on flood mitigation projects can miss the mark on equity if you only spend the big bucks to protect the big bucks. Communities already best-positioned to recover need less help doing so.

Part 2: Flood mitigation protects different families differently

In the first post about findings from my recent report for the Iowa Policy Project, I outlined impacts on low-income residents who have few options than to live in a flood-risk area, and few resources to cope or rebound.

Sand barriers in Cedar Rapids, Iowa Flood Center picture.
Photo: Iowa Flood Center

So what about preventing floods? Mitigation measures are great but are usually expensive and may be best positioned well upstream of the location where their protection helps most. Most people look to state or federal grant assistance in funding mitigation projects, but with resources being scarce — and they’re always scarce — a funding criterion has been established to assure mitigation measures must protect at least as much economic value as they cost.

On its face, this benefit cost analysis sounds quite reasonable, but it has a few consequences that, even if unintended, can be foreseen.

Consequence One: If you only spend the big bucks to protect the big bucks, then communities that may be best positioned to recover without help are given greater resources with which to protect themselves.

Consequence Two: How do you value the cost of displacement, lost economic opportunity from missed jobs, extra commute times, uninsured property loses, community fragmentation? Some of this can be valued, some cannot, and most of it is only clear after a disaster. This makes it hard to implement mitigation when funding justifications must happen first.

Consequence Three: Assuming you justify and pay for mitigation measures, have you just increased the value of the protected land to the point that current residents are suddenly priced out? Gentrification can be spurred by improved environmental and hazard risks as much as it can through beneficial tax codes, new transportation links or economic development incentives.

Previous, Part 1: Flooding hits different families differently
Next, Part 3: It all comes down to equity

Joseph Wilensky is a Master’s Degree candidate in the University of Iowa School of Urban and Regional Planning. Visit the Iowa Policy Project website for his December 2019 report, Flooding and Inequity: Policy Responses on the Front Line.

Differences in Disaster: A series of observations

A lower income family’s experience from flooding can be profoundly different from that of a family of greater means.

Part 1: Flooding hits different families differently

I’ve just wrapped up a paper on the different outcomes people experience following a disastrous flood destroying their world. Not only is a family’s experience different from the world they lived in prior to the flood, but depending on who they are, a lower income family’s experience can be profoundly different from that of a family of greater means.

It’s not shocking to hear that the poor in America live in a different world than anyone else, but Americans living in poverty are more likely to die in a disaster event and less likely to recover after one. Additionally, when Americans living in poverty recover, they usually recover worse off than they were before disaster struck. This is not the case for the well off. The well off tend to increase their net worth following a disaster.

Why is that? First, and most obvious, if people can afford to live in areas not prone to disaster, they usually choose to do so. Beach-view mansions in Malibu notwithstanding, people don’t usually build their home in known flood plains if they can afford to live elsewhere.

So if you’re located in a dangerous area, you usually can’t afford not to be there. Disaster strikes, the flood waters have started to recede and in preparing to rebuild you look to disaster recovery assistance to help you out. But there’s a problem. Disaster recovery assistance doesn’t come quickly, especially assistance from the federal government. This delay presents a real problem for those unable to absorb the cost of replacement shelter, replacement clothes, increased commutes to work (assuming the job is still there following a disaster).

The delay leaves people desperate for help , willing to jump on any assistance money that appears (even if doing so bars them from participating in larger programs later) or willing to sell their home or property to opportunistic investors who do have the ability to wait out assistance program delays. Having sold, or having grabbed available funds, you are worse off than you were before. Some with more resources can weather the paper storm that follows an actual one, and come out better than they were before.

Next, Part 2: Flood mitigation protects different families differently

Joseph Wilensky is a Master’s Degree candidate in the University of Iowa School of Urban and Regional Planning. Visit the Iowa Policy Project website for his December 2019 report, Flooding and Inequity: Policy Responses on the Front Line.

Tax credits: Just review them!

Iowa lawmakers are making the issue of tax credit reform much more difficult than it needs to be.

Put another way, consider tax credit reform as a different task: If we were setting out to design the first wheel, no cars would be on the road today.

The latest foot-dragging came in late October, with the first meeting of a so-called “Tax Credit Review Committee,” which if not for the delay was a rare, promising nugget in an ill-conceived, expensive and inequitable income-tax cut bill in 2018.

It was 10 years ago this fall that a scandal in the Iowa Film Tax Credit program led Governor Chet Culver to order a review of all state tax credits. A special panel of state department heads went through the credits and offered a set of reforms in January 2010.

Virtually nothing was done in response. Tax credits, particularly those for business, have gone merrily along, rising to a projected $434 million for this budget year. Of that, about 7 out of every 10 dollars, or $314 million, is for businesses. State revenue analysts expect under current law for these numbers to be similar through FY2024.

Basic RGB

While the tax credits themselves can be complicated, the fundamental issues are not.

  • Tax credits are expensive.
  • Tax credits are regularly and extensively analyzed by the Department of Revenue, making plenty of information available.
  • Tax credits, like any spending of public money — and this is, in fact, spending ordered outside the budget process — demand accountability and a demonstration of a public benefit.
  • The Legislature creates these exceptions to our tax code; thus, it falls to the Legislature to review them to determine if they meet their expected purpose.
  • Even if a given credit may benefit the public, it must be shown to be a better public expenditure than something else, like education or health care services.

As it is, the 2020 legislative session will open without anything serious being done about a review ordered two years before.

Truly it is easier not to do anything, to keep the gravy train running for the corporate lobbyists who benefit from these credits. But if you’re going to talk the talk about accountability in public spending, you should walk the walk.

The low-hanging fruit that could start lawmakers on that path is the Research Activities Credit, or RAC. The RAC is a refundable credit, which means that if you have more credits than you owe in taxes, you get a check from the state for the balance. The annual cost of the RAC is about one-fifth of the cost of all business and family tax credits.

As we have shown repeatedly — using data from an annual state report by the Department of Revenue — most of the RAC is paid as so-called “refunds,” not of taxes owed, but of tax credits not needed, and most of the benefit goes to very large firms.

Basic RGB

DOR evaluations — here and here as examples — provide evidence that is at best sketchy on whether the RAC promotes significant new research in the state. Companies that benefit from the RAC have to do the research anyway, just to be in business, or they wouldn’t bother with it.

In the case of a small startup firm, a credit for some period of time might help the firm get established. For multinational corporations with hundreds of millions or billions in profit, good luck proving the need.

Think of it this way: You could reduce or even eliminate the refundability of the RAC and not raise taxes on a single company or individual. But you’d have $40 million more available to put into public schools, or clean water projects, or any number of public priorities.

Incoming House Speaker Pat Grassley said tax credit reform “is kind of a long process.” But if one never starts, one will never design that wheel.

These are budget choices, ultimately. Why are legislators so afraid to even start on them?

MMike Owen is executive director of the nonpartisan Iowa Policy Project.

mikeowen@iowapolicyproject.org

Health care premiums are taxes

Do not let people mislead you by focusing just on taxes, leaving out the services those taxes pay for and the other costs those taxes replace.

Guest post: Ted Boettner, West Virginia Center on Budget & Policy

(Note: This piece also appeared in the Charleston, W.V., Gazette-Mail)

While the United States is a low-tax country compared to most industrialized nations, for a majority of Americans it doesn’t feel this way. That’s largely because private health insurance companies receive a large portion of our income every month. If we sent our money to a publicly run health insurance plan (e.g. Medicare) instead, almost all of us would save thousands of dollars each year while guaranteeing comprehensive health coverage for everyone.

The United States is unique in that we pay for a large part of our health care costs through an employer-based system. It is a creature of World War II, when we had price controls on wages and everything else to stamp down on inflation. Instead of increasing wages, employers offered health insurance. No other modern industrialized nation finances most of its health care system this way, because it does a terrible job of controlling costs, it’s highly regressive and it causes job lock, where people stay with a job just to receive health insurance.

For private-sector workers in West Virginia, the average health insurance premium was nearly $21,000 for family coverage in 2018. While employers typically cover most of these payments, it is widely recognized that employers consider the payments as part of an employee’s total compensation. Large increases in health insurance premiums have downward effects on workers’ wages.

The Economic Policy Institute finds that the rapid growth in employer-sponsored insurance premiums since 1979 had crowded out almost $390 billion in potential cash-wage increases for American workers by 2016, with employer-based family premiums now comprising over half of most worker’s wages.

A 2019 University of Pennsylvania study found that workers in West Virginia had the fourth-highest health care cost burden (family premiums as a share of median household income) in the nation in 2016. So employee compensation is going up, due to health insurance getting more expensive, but the money is going to private health insurance companies, leaving employers less likely to increase wages.

Since paying health insurance premiums is basically mandatory for most workers (employers with 50 or more full-time workers must enroll them in a health insurance plan), insurance premiums paid by employers act just like a tax — but a tax paid to private insurance companies, instead of the government.

If you include these payments as a tax on labor, U.S. workers are taxed higher than those living in most European countries. The insurance premium payments are also highly regressive, falling harder on those with smaller incomes. And this doesn’t even take into consideration out-of-pocket spending, such as co-pays or deductibles, which have also grown considerably over the years.

This is a terrible to way to fund health care. Setting up a universal system, such as Medicare for All, would give the vast majority of workers the biggest take-home pay raise they’ve ever seen. Instead of paying private health insurance companies, it would be financed publicly by enacting a combination of higher taxes on the wealthy and big corporations, implementing costs savings (e.g. lower prescription drug prices and administration costs) along with a flat payroll tax similar to Social Security and Medicare.

While the naysayers of universal health care like to talk about Medicare for All being a huge tax increase, it’s actually a massive tax cut for most Americans. Here’s an illustrative example. Suppose we have a privately owned and poorly run water utility in Kanawha County that charges everyone $50 a month despite frequent leaks and boil water advisories. One day, this utility shuts down and the county decides to take it over and charge everyone an annual “tax” of $500. Would you be outraged that you have to pay $500 in a new tax or be happy that you will now save $100 on your water bill each year?

(Hint: Ask a resident in Morgantown if they would prefer to pay Charleston rates for water or the lower amount to their publicly owned water utility).

While opponents of Medicare for All like to scare people with big numbers, saying it will cost $32.6 trillion over the next 10 years, this is actually about $2 trillion less in total national projected health spending over this period. Estimates show Medicare for All would reduce total U.S. health expenditures by $5.1 trillion over 10 years relative to current projections under our existing system.

The moral of this story is do not let people mislead you by focusing just on taxes, leaving out the services those taxes pay for and the other costs those taxes replace. Like clean water, we all need affordable health care coverage and today our premiums are taxing us harder than ever. Solutions like Medicare for All can reduce overall health spending while ensuring we all have access to health care anytime we need it. Untying health premiums from overall compensation gives us not only more money in our pockets, but the freedom to start a new business, avoid bankruptcy, lower stress, improve productivity and live longer and healthier lives.

The Center, like the Iowa Fiscal Partnership of the Iowa Policy Project and the Child and Family Policy Center, is a member of the State Priorities Partnership.

Business tax rankings: Misinformation continues

Tax Foundation misrepresents Iowa once again.

The Tax Foundation is at it again. The corporate-funded think tank released their latest bogus measure of state tax competitiveness, the 2019 State Business Tax Climate Index (SBTCI), on October 22nd.  The major features of the SBTCI remain unchanged from earlier editions. The fundamental criticisms of their methodology remain as salient as ever.

The State Business Tax Climate Index purports to measure a state’s “tax competitiveness” but the index bears very little relationship to what businesses actually pay in taxes in one state versus another. Of the 10 supposedly “worst” states in terms of business taxation according to the latest Tax Foundation ranking, 6 (including Iowa) actually ranked among the 21 states with the lowest business taxes, including two among the lowest 10, according to of the Council on State Taxation.

The Tax Foundation ranking (they put Iowa as the 9th worst state) differs dramatically from more defensible analyses that simply measure the average effective corporate income tax rate. The Council on State Taxation produces periodic estimates of all business taxes as a share of private sector Gross State Product and has consistently found Iowa to be among a sizable group of states right in the middle. In fact, their latest report shows that only 17 states have a lower effective business tax rate than Iowa, while 30 states have a higher rate.

The SBTCI is a combination of 124 components of state tax systems, giving substantial emphasis to some components that cannot plausibly affect tax competitiveness, while ignoring features that have a large impact on business taxes (single-factor apportionment and deduction of federal corporate income taxes). The last problem is particularly salient for Iowa. Iowa offers single-factor apportionment, which can drastically reduce a corporation’s Iowa tax if they export much of their production. And Iowa is one of the few states that allow corporations to deduct part of their federal income taxes on their state return. These two features help explain why the Tax Foundation ranks us poorly while others show us with average, or lower than average, taxes on business.

There are a few changes in the 2020 version of the index. The Tax Foundation now penalizes states for attempting to rein in corporate tax avoidance in two ways. First, they penalize a state’s score if they conform to the Global Intangible Low Taxed Income (GILTI) provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, which are intended to reduce the incentive to shift corporate assets abroad. State conformity would in fact help states avoid some of the corporate tax avoidance that has been eroding state revenues, due to the ability of corporations to shift profits overseas. But restoring revenues in this way is a bad thing, according to the TF. The second new feature is a penalty for states that conform to the net interest limitation in TCJA. This provision limits the ability of corporations to deduct interest expense, but apparently the TF thinks the deduction should be unlimited.

Iowa has chosen to conform to both of those provisions, for which the state’s taxpayers should be thankful. That the Tax Foundation has penalized Iowa in the rankings for trying to close corporate loopholes is just another reason to ignore their rankings.

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Peter Fisher is research director of the nonpartisan Iowa Policy Project. pfisher@iowapolicyproject.org

Full-time work not enough

Iowans are faced with limited economic opportunity despite their hard work.

Many Iowa families are unable to afford groceries, car maintenance or prescription refills, even though there is at least one full-time worker in the household. This presents a double bind, where Iowans are faced with limited economic opportunity despite their hard work.

The Iowa Policy Project’s 2019 Cost of Living report delves into these issues, finding work does not provide 1 in 5 Iowa working households enough to meet basic needs.

IPP constructs basic needs budgets that reflect a frugal standard of living — including food, health care, child care, household expenses, and transportation, then uses Census data to calculate the number of working households that make less than a wage that meets these basic requirements. These budgets leave no room for Netflix, student loan debt, vacations or eating at restaurants.

A majority of single-parent working households are unable to meet basic needs in Iowa. Our analysis shows that a wage of at nearly $20 per hour is needed just to afford basic expenses for single-parent families. This is consistent with research showing higher poverty rates among single-parent households, due to single incomes, child care expenses, generally lower educational attainment and low wages.

Evidence-based policymaking can address the reality that many working Iowans do not make enough to afford basic expenses. Policies that increase the minimum wage and adjust it to the cost of living, provide paid family leave, and boost Child Care Assistance will serve to ensure Iowans are able to just get by and hopefully get ahead.

Natalie Veldhouse is a research associate at the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org