Repeal of Obamacare: Following the money

Replacing ACA will be costly to many Iowa families, particularly older and rural Iowans.

Congressional Republicans have proposed replacing the Affordable Care Act, known as Obamacare, with the American Health Care Act, or ACHA. To understand why, suppose we follow the money — who loses, who gains?

On the losing side are thousands of Iowans who would find themselves facing higher costs for health insurance. Consider a married couple with two young children, and with $40,000 annual income. In Iowa’s metropolitan counties, this family’s tax credits for the purchase of health insurance would fall by $3,469 annually. In rural areas, where health insurance is much more expensive, the same family would face nearly an $8,000 reduction in credits — in other words, an $8,000 increase in the cost of health insurance. For couples in their late 50s or early 60s, the jump in costs is much higher: $11,300 in urban areas, over $17,000 in rural counties. (See an earlier IPP report for details.)

The much greater impact on rural Iowans is because the Republican plan gives everyone the same credit, whether they are in a high-cost or low-cost county. While the credit rises with age,  the credits for older Iowans cover a far smaller share of their much higher insurance costs. Overall, the average Iowa family currently receiving subsidies for the purchase of insurance would see a $2,512 drop in the subsidy.[1]

But who are the winners? The Republican plan includes tax cuts primarily for the wealthiest Americans, as well as drug and insurance companies. The 400 highest-income taxpayers nationally would get annual tax cuts averaging about $7 million each. These taxpayers, whose annual incomes average more than $300 million, would receive tax cuts totaling about $2.8 billion a year.[2]

We now know how two of these cuts, amounting to $31 billion a year, would impact Iowans. The Affordable Care Act was financed in part by these two new taxes. One is the Net Investment Income Tax, the other the Additional Medicare Tax. Both fall primarily on the wealthiest. Repeal of these two ACA taxes would shower $116.7 million in tax cuts each year on just 1.9 percent of Iowa taxpayers. A full 92 percent of those tax cuts would go to the richest 1 percent of Iowa taxpayers — those making $444,000 a year or more, and with an average income of $1.17 million. Those taxpayers would receive on average $7,004 a year.[3]

“Follow the money” is good advice. But what you find when you get there is often not a pretty picture.

[1] Aviva Aron-Dine and Tara Straw. House Tax Credits Would Make Health Insurance Far Less Affordable in High-Cost States. Center on Budget and Policy Priorities, March 9, 2017.

[2] Chye-Ching Huang. House Republicans’ ACA Repeal Plan Would Mean Big Tax Cuts for Wealthy, Insurers, Drug Companies. Center on Budget and Policy Priorities. March 8, 2017. http://www.cbpp.org/research/federal-tax/house-republicans-aca-repeal-plan-would-mean-big-tax-cuts-for-wealthy-insurers

[3] Institute on Taxation and Economic Policy. Affordable Care Act Repeal Includes a $31 Billion Tax Cut for a Handful of the Wealthiest Taxpayers. March 2017. http://itep.org/itep_reports/2017/03/affordable-care-act-repeal-includes-a-31-billion-tax-cut-for-a-handful-of-the-wealthiest-taxpayers-5.php

Posted by Peter Fisher, Research Director of the Iowa Policy Project

pfisher@iowapolicyproject.org

A spotlight, not a floodlight, on business breaks

Iowa’s business tax credits have tripled since 2007 and will have quadrupled by 2021 under current official projections. That is where the spotlight needs to be.

A bill in the Iowa House, HSB187, would cut a range of Iowa tax credits, eliminating refundability and capping overall spending on credits. There is significant opposition, because people like their tax breaks. But the issue is suddenly in the spotlight because these and other giveaways are responsible for Iowa’s serious revenue challenge.

There are solutions to the state’s rampant and often unaccountable spending on tax credits and other tax breaks. It is interesting that an interim committee that meets every year to examine a rotating set of tax credits has not produced any reforms. It’s not because reforms are not necessary. Rather, it’s a lack of resolve.

One of several strong recommendations in January 2010 by a Special Tax Credit Review Panel appointed by then-Gov. Culver in the wake of the film credit scandal was for a five-year sunset on all tax credits. This would require the Legislature to re-approve every tax credit.

That would be a start. Another option: Instead of eliminating refundability for all credits, which affects even credits where refundability makes sense (Earned Income Tax Credit), limit it where it does not. The Special Tax Credit Review Panel recommended eliminating refundability for big recipients of the Research Activities Credit (companies with gross receipts over $20 million). Another option would be to cap refundability for all credits at $250,000, which would not harm small players, either businesses or individuals, and would reduce the excessive checks to big businesses.

The scrutiny and demand for a return on investment on these credits would be too much for many of these special arrangements to withstand. Eliminating or capping wasteful credits would free up revenues for other priorities; some would invest more here or there — education, or public safety, or the environment — and some would simply use it to reduce overall spending. But either way, we would have the opportunity for a debate.

There is a danger in putting everything on the table at once. It presents a false equivalency of tax credits — that they are somehow all the same. It ignores the fact that some are for private gain and some for the common good, and some are a mixture. Some work, and some do not.

Some meet the purpose for which they were advertised (the Earned Income Tax Credit, for example, which benefits low-income working families), and some miss the mark with tens of millions of dollars every year (the Research Activities Credit, where most of the money goes to huge, profitable corporations that pay little or no income tax instead of to small start-ups as envisioned).

Iowa’s business tax credits have tripled since 2007 and will have quadrupled by 2021 under current official projections. That is where the spotlight needs to be.

Challenging all credits at the same time gets everyone’s backs up. That is a recipe to assure continued unwillingness to take on any of it. And that will not serve Iowa very well.

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

mikeowen@iowapolicyproject.org

Less government means ‘less us’

Because government means “us,” less government means “less us.” It almost always means more corporate interest, not public interest … and … more inequality, injustice, and disparity. Worst of all, it means fewer public services.

Imagine new occupants of a large historic building who decide to do a major remodeling project, and they do not take the time to learn how the building was built and what previous structural changes were done to the building. They tear into this column, that wall, or that beam, without thinking that these are indeed load-bearing walls and beams that keep the building standing.

The remodeling fever we are seeing in Washington and the Statehouse involve trashing all things public: public schools, public services, public health, and public employees — the load-bearing foundations of democracy and daily life.

The most meaningful insight I gained from serving on the City Council involved learning the functioning of government at the community scale: police protection, fire protection, water, sewer and inspection services, planning services, utilities, arts and cultural services, a fantastic library, community center, great schools and services for children with special needs. I get up every morning thinking about these public services and the people who make them happen, and I am grateful.

That is why I find it astonishing that so many people continue to fall for the falsehood that “government is bad.” Many of us immigrants have come from countries that have fallen apart in violence and disorder in the absence of a functioning government. Thousands of U.S. troops have died to establish a decent governing process in Iraq and Afghanistan, but here at home, we are told government is bad, private-everything is good, corporations are the greatest, and all things public are bad. Do our troops serving in Afghanistan know about the rush to diminish government at home?

Because government means “us,” less government means “less us.” It almost always means more corporate interest, not public interest, making decisions for us, and invariably leads to more inequality, injustice, and disparity. Worst of all, it means fewer public services. We have heard “government should be small,” but why have we not heard “corporations should be small and their influence on government limited?”

Less self-governance, providing fewer services, has produced results: contaminated eggs sickening thousands and contaminated meats killing children because we have not inspected and protected our food supply. Inspection services supposedly are “too much regulation.” Toxic releases, polluted air, contaminated drinking waters, the national financial crisis are all clear and predictable results of “less regulatory burden,” “less government” and more corporate irresponsibility.

Let us not forget that our properties, our lives, our neighborhoods, and our businesses are richer and better because there is police and fire protection, law, order, a system of fair courts, and regulations. We are better off because we are situated in and are beneficiaries of a publicly organized infrastructure that offers basic services to all, including protecting Iowa’s commonwealth which provide ecosystem services such as clean air and clean water. Public works.

While the process of governing ourselves is not perfect and can be improved, “less government” is no improvement. We are the lucky beneficiaries of many generations before us who gave so much to build this nation, but, as many of us immigrants know, democracy and self governance are highly perishable. They are not something we have, but something we have to make every day and nurture through our involvement. Like a garden, you have to tend it.

kamyar-enshayan5464300Kamyar Enshayan served on the Cedar Falls City Council from 2003 to 2011. Enshayan is director of the Center for Energy and Environmental Education at the University of Northern Iowa, where he teaches environmental studies. He has been a member of the Iowa Policy Project board of directors since July 2016.

Virtual House graphic: Closer look at who gains with local raises

Well over half of those benefiting from local minimum-wage increases are women, workers over age 20, and full-time workers.

Basic RGBAs we have shown, about 85,000 Iowa workers stand to gain from local minimum-wage increases in Linn, Johnson and Polk counties when they are fully phased in as scheduled in 2019. As we show above, the beneficiaries are not who minimum-wage proponents typically attempt to portray in dismissing the importance of the wage.

Well over half are women, workers over age 20, and full-time workers. These are jobs that are essential in meeting household budgets.

Iowa’s minimum wage is $7.25, where it has stood for over nine years. Johnson, Linn, Polk and Wapello counties have passed increases scheduled to reach between $10.10 and $10.75 by 2019.

For more about the minimum wage in Iowa, both statewide and locally, visit this page on the IPP website.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. In today’s graphic, we illustrate the impacts of local minimum wages that have been approved in Iowa. We focus on three of the four counties where wages higher than the statewide $7.25 has been approved. In the fourth county, Wapello, the impact has been blunted by the refusal of the city of Ottumwa to go along with it.

Today’s virtual House graphic: Iowa impact of ACA repeal

170119-IFP-ACA-F1

Yes, whatever actions are taken on the Affordable Care Act will come from Congress, but state legislators may be left to pick up the pieces. Iowa legislators, are you paying attention? Are you talking to your federal counterparts about this? (Some are in the state this week.)

What many may not know is the impact the ACA has had on reducing the uninsured population in Iowa. The Medicaid expansion under the ACA is one of the big reasons we have seen a greater share of the Iowa population covered by either public or private insurance.

For more information on how the ACA has affected uninsurance in Iowa — and the stakes of repeal without an adequate replacement — see Peter Fisher’s policy brief, Repealing ACA: Pushing thousands of Iowans to the brink.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. Here is today’s graphic, to illustrate the impact on Iowa, and potentially on state finances and responsibilities, if the federal Affordable Care Act is repealed.

Today’s virtual House graphic: Who gains with local raises

Local power to raise the minimum wage allows higher-cost-of-living communities to adopt wages that better match their housing and living costs.

Basic RGB

About 29,000 Iowa workers have already seen pay raises because the supervisors in Johnson and Linn counties enacted a local minimum wage, held at a mere $7.25 statewide for over nine years. That number will more than double to 65,000 come April, when the first step of the Polk County minimum wage takes effect.[1] By January 2019, when wage rates in all three counties will top $10.10, about 85,000 Iowa workers will be enjoying a substantial increase in their pay.[2]

All of those wage gains will be rolled back if a bill under consideration in Des Moines is passed and signed into law. House File 295 would prohibit counties from enacting any law that sets standards for wages, benefits, scheduling, or other employment practices that are higher than state law. It would also nullify the wage ordinances already enacted in four counties where the elected representatives took action to help low-wage workers in the face of nearly a decade of state inaction.

Who are the workers who have gained, or who will gain, these pay raises? They are disproportionately women (56 percent) and disproportionately non-white (20 percent), compared to the overall population shares. Only 1 in 6 is a teenager; 31 percent are age 40 or older, while 53 percent are age 20 to 39. Almost three-fifths work full time, while only 13 percent work 20 hours per week or less. Of the workers seeing a bigger paycheck, 31 percent are parents.

Iowa is a low-wage state in an increasingly low-wage economy. In 2016, the median wage (half of Iowa workers earn less than that, half earn more) was $16.04 an hour, just 13 cents higher than it was in 1979 when adjusted for inflation. Since that time, worker productivity has risen 167 percent, but the gains from that greater productivity have not gone to workers. Minimum wage increases are one of the most important ways of ensuring that the gains from economic growth are widely shared instead of being captured by the richest 1 percent of households.

Local power to raise the minimum wage allows higher-cost-of-living communities to adopt wages that better match their housing and living costs. Local, democratically elected boards have passed laws overwhelmingly supported by Iowans that are raising the wages of about 85,000 Iowa workers, helping not just those workers and their families, but local economies dependent on their spending.

[1] The Johnson County minimum wage rose to $10.10 in January, 2017, and increases by the rate of inflation after that. The first step of the Linn County wage to $8.25 also took effect in January, and the last step, to $10.25, is scheduled for January 2019. The Polk County minimum becomes $8.75 April 1, and rises to $9.75 January 2018 and then $10.75 January 2019.

[2] A county minimum wage was also enacted in Wapello County, but the city of Ottumwa, home to most of the jobs in the county, nullified it within the city by enacting their own ordinance leaving the wage at the state level. We do not include any estimates for Wapello County in our figures. In Johnson and Linn counties, a few small towns have also enacted ordinances establishing minimum wages below the county level, but few jobs are affected. The number benefiting from the higher minimum wage includes all those projected to be earning less than that wage as of the year the minimum goes into effect (about 65,000 workers), as well as those whose wages are a little above the new minimum but who can be expected to get a raise in order to retain parity within a business or in order to remain competitive in the labor market (another 20,000).

2010-PFw5464Posted by Peter Fisher, research director of the Iowa Policy Project
pfisher@iowapolicyproject.org

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. Here is today’s graphic, to illustrate how many Iowans are gaining from locally approved minimum wages.

Kansans deliver tax-cut cautions for Iowans

“You have the opportunity to not be like Kansas.”

As part of Moral Mondays at the Iowa State Capitol, Iowa advocates and lawmakers this week heard a cautionary tale from Annie McKay of Kansas Action for Children and Duane Goossen of the Kansas Center for Economic Growth.

Annie McKay, president and CEO of Kansas Action for Children, speaks at the Moral Mondays Iowa event this week at the Iowa State Capitol.
Annie McKay, president and CEO of Kansas Action for Children, speaks at the Moral Mondays Iowa event this week at the Iowa State Capitol.

At a time when Iowa lawmakers are considering significant tax cuts, McKay and Goossen, who analyze and promote child policies and conduct analysis of the Kansas state budget, traveled to Des Moines to outline the effects of what has become known as the “Kansas experiment,” a set of draconian tax cuts passed in 2012.

At that time, Goossen recounted, Gov. Sam Brownback promised the cuts would bring an economic boom to the state, with rising employment and personal income. People would move to Kansas. It would be, the governor said, “like a shot of adrenaline into the heart of Kansas economy.”

But, five years on, the promised economic boom has not arrived.

“Business tax cuts were supposed to be magic, they were supposed to spur job growth — and they didn’t,” said Goossen, a former Republican state legislator and state budget director under three governors.

In fact, since 2012 job growth in Kansas has lagged behind its Midwestern neighbors, including Iowa. The state has, however, seen years of revenue shortfalls and damaging budget cuts, eroding critical public services like K-12 and higher education, human services, public safety and highway construction.

In this period, the state has depleted its budget reserves, robbed its highway fund to shore up its general fund, borrowed money and deferred payments in order to balance the budget. Kansas has experienced three credit downgrades. Lawmakers have raised the sales tax twice and repealed tax credits that helped low-income families make ends meet.  (In fact, the bottom 40 percent of Kansans actually pays more in taxes today than before the 2012 tax cuts went into effect.)

These actions have real impacts. Last year, Kansas saw the third biggest drop in child well-being among states as documented by Kids Count. Its 3rd grade reading proficiency ranking fell from 13th to 30th.

“What we did in Kansas – there is no proof behind it,” McKay said.

Iowans today are better positioned to stand up to damaging tax cuts than their Kansas counterparts were five years ago, McKay said. “We did not that have same people power in 2012.” She advised Iowa advocates to make crystal clear how all the issues currently generating widespread interest — education, health and water quality among them — are linked to the state’s ability to raise adequate revenue.

“You are ahead of where we were,” she said. “You have the opportunity to not be like Kansas.”

 

annedischer5464Posted by Anne Discher, interim executive director of the Child & Family Policy Center (CFPC).
adischer@cfpciowa.org

McKay and Goossen’s talk Feb. 13 at the Iowa State Capitol was coordinated by the Iowa Fiscal Partnership (a joint effort of CFPC and the Iowa Policy Project) and supported by the Center on Budget and Policy Priorities. CFPC, through its Every Child Counts initiative, is one of more than two dozen sponsors of Moral Mondays, a weekly gathering during session to highlight issues that advance Iowa values like equality, fairness and justice.