IPP News: Opportunities to reform policing, community safety in Iowa

FOR IMMEDIATE RELEASE, WEDNESDAY, JULY 22, 2020

New IPP report identifies key data, potential for reform in state, local budgets

FULL REPORT HERE

iowacapitol-rotunda

IOWA CITY, Iowa (July 22, 2020) — Police spending per capita has grown over the past 30 years and consumes a greater budget share in Iowa’s seven largest cities, while social spending has on average declined, a new report shows.

The May 25 killing of George Floyd by Minneapolis police and other widely documented cases of police brutality have prompted large-scale protests in Iowa and nationally, and have put a fresh spotlight on police spending and police practices.

In their new report, “Policing, public safety and community priorities,” Iowa Policy Project (IPP) authors Colin Gordon and Peter Fisher identify spending trends by state and local governments, not only for policing but other key public services.

Among their findings:
·      Police and corrections make up about 5 percent of all state and local government spending in Iowa, a level largely unchanged over three decades.
·      The share of such direct spending by cities and counties has grown.
·      Larger urban settings in Iowa have a well-documented pattern of disproportionate minority contact.
·      The three state university cities — Iowa City, Ames and Cedar Falls — spend the least on police among cities of 20,000 or more. This may relate to separate university public safety departments in those communities. But social program funding has shrunk as a budget share in those cities.
·      The share of budgets going to police in suburbs and smaller non-metro cities has varied, while budgets have shrunk for social services in many small cities.
·      Police spending is not directly related to population diversity, regardless of city size.
·      Spending levels tell nothing about how police practices might vary.

“Public budgets represent our values and priorities,” said Fisher, IPP research director. “The average spending share for the seven largest cities in 2017 was 21.6 percent, and averaged over 20 percent for the other cities of 20,000 population or more, except for the university cities. The new focus on policing reform will have an impact across a wide range of priorities.”

Fisher said cities and counties do have options to meet locally identified needs from policing to social services, despite substantial constraints in state law on local control of funding options. The report, however, also pointed out fundamental change in funding of education, social services, and family supports will require state action.

“Cities account for lion’s share of expenditures on policing, but spend little on social services other than housing. Social supports and education, in turn, are largely the responsibility of jurisdictions — states, school districts — that spend little or nothing on policing,” the report stated.

The report notes current “push for change revolves around two arguments with budget and policy implications for police and other public services.

“The first is simply that our system is fundamentally broken,” the report notes. “The starkest evidence on this point is the pervasive and systemic racial inequity woven throughout our criminal justice system.

“The second argument is that a share of the resources we devote to policing could and should be spent more strategically and effectively. In this sense, the question is one of budgetary priorities.”

Gordon and Fisher do not make recommendations about police procedures, but lay a foundation of budget and debate context that Iowans may use as they “re-imagine” public safety.

“As Iowa communities grapple with these issues, it is important to understand the basic elements of proposals, the arguments and evidence behind them, and the policy and budget implications,” said Gordon, senior research consultant at IPP and a professor of history at the University of Iowa.

The report states the policy implications are wide-ranging. It specifically notes interest that has grown in one approach, community policing — considered less adversarial and oriented more than traditional policing to reconciliation, relationship development and local trust.

“It is the first priority of the city of Iowa City’s 17-joint response to demands of the Iowa Freedom Riders,” Gordon noted. “People in Iowa communities want to be at the table. This is particularly true for those who have been left out by a structure that has protected wealth and white power, skewing interactions between police and the broader community and people of color.”

The report notes that the state can play an important role in police operations at the local level, as shown by unanimous passage of a bill in June restricting police use of chokeholds, mandates de-escalation training and other measures. However, some lawmakers wanted other steps, including a study of racial profiling practices, and such proposals were left to future legislative action.

Find the report on the Iowa Policy Project website, www.iowapolicyproject.org.

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Historically high: Jobless claims vs Great Recession

New unemployment claims are trending down, but still rising and in the latest week were still nearly as high as the worst week of the Great Recession.

The pace of new unemployment claims slowed in Iowa to 13,040 for the week ending May 16, but still nearly as high as new claims in the worst week of the Great Recession. Meanwhile, the running total of new claims since mid-March — at 313,150 — is about 18 percent of Iowa’s entire labor force.

On top of that, Iowa has slowly begun to process claims for Pandemic Unemployment Assistance (PUA), the federally funded benefits for those ineligible for regular UI. In the week ending May 9, there were 15,219 Iowans on continuing PUA claims and 4,552 new applications.

The PUA has enormous potential for the self-employed, independent contractors, platform or “gig” workers, and new entrants to the labor force. It pays a weekly benefit of between $200 and $590 (depending on earnings and dependents). Once approved, recipients can received up to 39 weeks of benefits — retroactive to early February and running through December. Receipt of PUA benefits brings with it another $600 month in Pandemic Unemployment Compensation (PUC), the federal top-off that runs through the last week of July.

All of this is funded entirely with federal dollars — making it an important source of economic stimulus for the state as well.

But the rollout of the PUA has been slow. Initial applicants were summarily rejected by Iowa Workforce Development and the first payments did not trickle out until almost two months after the program was put in place. And the number of new and continuing PUA claims in Iowa (just under 20,000) as of this morning is very low given the number of Iowans that could benefit from this program (taken together, those reporting some form of self-employment income and new entrants probably account for about 20 percent of the labor force). Under normal conditions, Iowa pays unemployment claims to only about 41 percent of the unemployed. The PUA could and should extend that coverage dramatically.

Colin Gordon is senior research consultant for the Iowa Policy Project and a professor of history at the University of Iowa.

Churchill’s words for Iowa’s future

Iowans should take this opportunity to build a stronger, more resilient state that is forward facing and not just rebuilding what came before.

“Never let a good crisis go to waste” — Winston Churchill.

Mass government spending and social distancing nearly everywhere is a response to the COVID-19 outbreak in the United States. Perhaps we, like Winston Churchill, writing during World War II, might find a silver lining.

There is a sense of national unity or purpose, an outpouring of selfless action by medical professionals, and a renewed sense of national urgency to “Wash your damn hands!” What is intriguing to me is the number of individuals who — if they are still working — are suddenly shifted to a work from home situation and the follow-on effects that this has had.

While not all the “dolphins returning to the canals of Venice videos” are real (sorry!), the reduction of air pollution and greenhouse gas (GHG) emissions in China are observable and documented.[1] European cities are seeing similar reductions in GHG emissions and air pollution. A similar impact may soon be seen in the United States as “shelter in place” directives, which cut driving and factory production, take hold across the nation. The economic slowdown from the spread of COVID-19 could lead to a 9 percent reduction of emissions from the sector that is the largest GHG generator across the nation.

The transportation sector is the largest source of GHG emissions nationwide, and nearly one-third of all miles driven are for commuting purposes.[2] While only 5 percent of Americans regularly work from home today,[3] the Bureau of Labor believes that nearly one-third of Americans could do so.[4] Winston Churchill might ask: How can this be made sustainable?

From recent personal experience, working from home, especially if your partner also is now working from home, requires very few things — a comfy chair, a tub of salted pretzels, and high-speed internet. I am fortunate that I live in an area with access to broadband, but many Iowans find broadband access prohibitively expensive or lack access at any price. My own family members who live in rural areas of Iowa have experienced broadband access problems.

This disparity is well known to Governor Kim Reynolds’ office, which has encouraged the growth of broadband throughout the state through a grants program.[5] Even with this support, much of Iowa remains in a broadband desert, without access to the high-speed internet that allows for teleworking options for Iowans. The blue-shaded areas in the map below indicate areas lacking 25-megabit-per second download speed and 3-megabit upload speed, known as 25/3 broadband, in June 2018.[6]

Similarly lacking in quality are Iowa roads. The American Society of Civil Engineers gives Iowa an overall grade of “C,” with an even lower grade of D+ and D for our bridges and dams.[7] This is also not a new phenomenon, and the old joke of the Midwest having two sessions, winter and construction, points to the constant state of improvements we often find.

With these poor infrastructure grades in mind, how do we make the crisis of COVID-19 not go to waste? The federal government is passing legislation and considering more policy to provide needed financial support for workers, businesses, and the states.

While funds must first go to supporting those who have lost their jobs and for healthcare, infrastructure programs are also a way to quickly inject money into local economies once the crisis has subsided. We can even ensure some workers stay employed as we increase infrastructure construction during these economic lean times.

How? We can super-charge telecommunications investments by the state, either directly or via low-interest loans and grants to existing telecommunication firms. We can use the available public right-of-way that exists on local and state roads to lay fiber for broadband communication capacity across the state while also jump-starting road and bridge repair projects.

When telecom companies are given loans or grants, they should come with price caps to ensure that broadband service extensions are actually used by the rural public. Roads should be rebuilt with an eye less toward peak commuting travel, but more realistic travel demands in a world with expanded telecommuting and reduced motorist traffic.

In short, Iowans should take this opportunity to build a stronger, more resilient state that is forward facing and not just rebuilding what came before. And, they should ensure that fair and prevailing wages are paid for all construction contracts.

This time is one full of heartbreak for families directly affected by COVID-19 and anxiety for those wondering if and when their own family will fall ill. Industries are struggling and the economy may be grinding to a halt by the swift application of painful, but necessary, distancing efforts.

But within these trying times is an opportunity to respond with the future in mind. Like Churchill said, we should not let this crisis go to waste.

 

[1] https://www.politico.com/news/2020/03/13/climate-advocates-hit-political-turbulence-127649

[2] https://www.fhwa.dot.gov/policy/2015cpr/chap1.cfm

[3] https://www.cnbc.com/2019/10/13/people-who-work-from-home-earn-more-than-those-who-commuteheres-why.html

[4] https://www.bls.gov/news.release/flex2.t01.htm

[5] https://ocio.iowa.gov/broadband

[6] https://ocio.iowa.gov/broadband-availability-map-version-2

[7] https://www.infrastructurereportcard.org/wp-content/uploads/2016/10/ASCE_Brochure-IOWA2019.pdf

Joseph Wilensky is a Master’s Degree candidate in the University of Iowa School of Urban and Regional Planning. He has been an intern at the Iowa Policy Project during the 2019-20 school year.

JobWatch: Tough January, rough 2019

NEWS RELEASE

First net job loss over calendar year since Great Recession

IOWA CITY, Iowa (March 16, 2020) — Iowa payroll jobs dropped in January for the third straight month, the latest official numbers confirming a net job loss for 2019.

The nonpartisan Iowa Policy Project released this statement from executive director Mike Owen about the preliminary January numbers reported Monday by Iowa Workforce Development. February numbers are expected later this month.

“Today’s report does not bode well for Iowa jobs or the Iowa economy as we face the two-pronged challenge of public health threats and economic uncertainty with the spread of the coronavirus.

“Iowa had not experienced a full-year job loss since the last recession, and January did not improve that outlook. While the one-month job loss of 900 appears small, the longer look shows it to be part of a decline of 6,400 from January to January.

“For the calendar-year 2019, the total job loss was1,300. We had not seen a net job loss over a calendar year in Iowa since the Great Recession in 2008-09.

“Since January, the Reynolds administration has pushed a tax-cut proposal. The latest job news might change that strategy as this is no time to be reducing revenues. The state must use the funds we have to invest in supports for working families whom we can expect to struggle in the near term.

“Boosting access to health care, food assistance, unemployment benefits and paid sick leave are important components of a plan to invest in those who will determine the quality of Iowa’s future.”

Key Numbers for January 2020

Nonfarm jobs dropped by 900 to 1,584,500, the third straight monthly drop and fifth in six months.
Iowa’s unemployment rate held at the revised level of 2.8 percent, previously reported at 2.7 percent for December. That compares with 2.7 percent in January 2019.
Four of the 11 major job categories showed gains in January, and six showed declines, with no sector showing a change of 1,000 or more. Government showed the biggest gain, only 900, with construction at 800.
Manufacturing was down 800, as was trade and transportation.

Key Trends

Iowa lost a net 6,400 jobs from January 2019 to January 2020.

For the calendar year 2019, nonfarm jobs averaged a 100-job monthly decline. In 2018, jobs declined in only four of the 12 months; in 2019, they increased in only four of the 12 months.

The year was the first since 2009 with a net drop in payroll or nonfarm jobs. Jobs dropped by 15,600 in 2008 and 47,800 in 2009. For calendar 2019, Iowa lost 1,300 jobs.

From January 2019 to January 2020, the “other services” category led gains at 2,200, followed by leisure and hospitality at 1,800 and government at 1,300. Trade and transportation led declines at 4,800, followed by professional and business services at 2,500, manufacturing at 1,300, information at 1,100, and education and health services, also 1,100.

The Iowa Policy Project (IPP) is a nonpartisan, nonprofit public policy research and analysis organization based in Iowa City. IPP has been tracking Iowa job trends since its founding in 2001 and has regularly provided reflections on official monthly job reports since 2003.

 

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New tax limits mock transparency

In one bill, lawmakers enshrine minority rule, punish public workers (again), penalize economic growth and hamstring cities recovering from natural disaster.

curtains-tighterMocking transparency for voters, taxpayers

In the wee hours of Thursday morning, while most Iowans slept, the Iowa House enacted a sweeping change to the way city and county governments fund public services, approving a bill that had passed the Senate just the evening before. In this one bill, the Legislature managed to enshrine minority rule, punish public-sector workers (yet again), penalize economic growth, and hamstring cities recovering from a natural disaster. With no apparent sense of irony or hypocrisy, the bill’s supporters argued the purpose was to increase transparency for voters.

Removing democracy in local decisions

The bill would limit the growth of property taxes levied by cities and counties to 2 percent each year. If local officials, elected to set budgets and decide how to finance them, find that the services their constituents are demanding require that revenues exceed that 2 percent, they cannot do so unless two-thirds of the council or board agree. So much for majority rule and local democracy.

Eroding employee benefits and security

How does this bill hurt city and county employees? Under current law, tax rates for the city and county general funds, and the county rural services fund, are limited. But the law recognizes that increases in employee benefits are to a large degree outside the control of local elected officials. The state sets the employer contributions required each year to maintain the solvency of public employee pension funds, while increases in premiums for health insurance are set by the insurance companies.

Both costs have been increasing more than 2 percent annually, often much more.[1] Under current law, a separate property tax levy for employee benefits can be increased to the rate needed to fund those benefits.

No longer. Under the bill just passed, employee benefits must now be financed along with all other public services, under the 2 percent cap. When pension contributions and health insurance premiums increase more than 2 percent, the cost of providing services goes up but the city or county may be unable to accommodate the cost increases without cutting services which means laying off the workers who provide them to keep overall spending growth under the cap. The bill pits taxpayers against the people who plow their streets, protect their homes, build roads, or maintain parks and libraries. When services are cut, public employees can be portrayed as the scapegoats.

Imposing a penalty on economic growth

The new bill also penalizes local governments for pursuing growth. There were earlier House and Senate bills that sought to limit property taxes, and the fiscal notes explaining those bills and their impact were just released on Tuesday. Both of those bills would have repealed the tax rate limits under current law, replacing them with the revenue growth caps, and would have applied the growth caps only to taxes from the revaluation of existing properties. New construction for a given year, which generates new property tax base that pays for the additional services needed to accommodate growth, would not count against a city’s new limit on property tax revenue. Under those earlier proposals, the taxes generated by new construction would not be part of the revenue increase that is limited.

But on Wednesday evening, the Senate replaced the existing bill with a new one, and then passed it and sent it on to the House. The new version keeps the rate limits in place, in addition to imposing the growth limit, and it does not exempt new construction from the limit. The effect is to severely penalize cities and counties that experience economic growth.

Under the previous versions, a city experiencing annual growth through the revaluation of existing properties at 2 percent or less would not be constrained by the law if they keep the property tax rate the same from year to year, regardless of how fast they grow. But under the new version that passed, a city levying at the maximum $8.10 levy rate and experiencing 2 percent increases in the value of existing properties, but growing from new construction at the rate of 3 percent as well, would see revenues decline by 13 percent within five years compared to current law, or the previous bills. Increase that growth rate to 4 percent, and the penalty becomes 17 percent in five years.

Will cities and counties even want to grow, knowing that they are not going to be allowed to raise the revenue needed to service the new business and new population? Did legislators even recognize that the new bill contained this growth penalty when they voted for it? Or was that the idea — to penalize the growing areas, which are predominantly urban?

Imposing a penalty on economic disaster

At the same time, the bill would hamstring cities trying to recover from a natural disaster, or from a loss in taxable value due to an economic downturn or from the vagaries of Iowa’s assessment rollbacks. Cities and counties now would face two caps: the existing rate cap, and the revenue growth cap. The combination could be devastating. When taxable value declines, say to a loss of property value after a major flood or recession, the rate cap ensures that revenues will decline with the loss in tax base, for any city or county at or near the rate limit. But as the recession ends or the city rebuilds, the new 2 percent revenue cap could now undermine recovery. The reduced revenue becomes the new starting point, so as taxable value increases again, they may be unable to restore revenues even to the previous level because they are constrained to 2 percent increases per year. And this just at a time when extraordinary measures are needed to help the recovery.

[1] The average premium for group health insurance provided by governmental bodies in the Midwest has increased on average 3.5 percent per year for the past three years, according to a survey by the Kaiser Family Foundation.

2010-PFw5464Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City. pfisher@iowapolicyproject.org

Iowa jobs: Where we are

Over a decade later, post-recession Iowa is way behind where it should be in jobs, wages and economic security.

Over a decade since the housing bubble burst in late 2007, and almost nine years since the start of the recovery, we are far from where we should be in job growth, wages, and economic security.

Iowa climbed back to pre-recession levels of nonfarm employment in July 2013. But, as the recovery staggers along, that threshold becomes increasingly meaningless. Since 2007, the state has continued to add to its labor force through immigration, domestic in-migration, and high school or college graduation.

Just to keep pace with growth in the working-age population (about 7 percent since 2007), while sustaining pre-recession rates of employment and labor force participation, we should have added (as of last month) 106,100 net jobs over that span. Instead, we gained back only 67,800 jobs — leaving a jobs deficit of 38,300.  For the latest numbers, see our monthly “JobWatch” report.

In turn, we face another persistent deficit: a shortage of good jobs. In our State of Working Iowa discussion of wages, we underscored remarkably weak wage growth in Iowa despite historically low rates of unemployment.

This partly reflects the lack of worker bargaining power: Without access to collective bargaining and robust, well-enforced labor standards, there is little prospect of winning wage real and lasting gains. And in part, this reflects the changing contours of Iowa’s labor market. Over the last generation, and across the last business cycle, we are steadily trading good jobs for bad.

Two factors are driving the loss of good jobs: the composition of jobs (which sectors are growing or declining), and the quality of jobs (declining wages and standards within sectors or occupations).

During the recession, employment losses were heaviest in middle- and high-wage sectors of the economy — especially manufacturing, which shed nearly 30,000 jobs between December 2007 and June 2009. Early in the recovery, these losses continued and — in Iowa and across the nation — job gains were concentrated in low-wage occupations.

181227-SWI-Figure1a

The pattern of gains and losses across sectors in Iowa is summarized in the figure above. As of late 2018, large recessionary losses in manufacturing and information have still not been recovered (indeed, the information sector continued to shed jobs during the recovery).

The largest net gains are in the low-wage leisure and hospitality sector, construction, professional and business services, and education and health services.

In the latter, the job gains are all on the health care side of the ledger. This largely reflects hiring in health care in response to a surge in demand sparked by increased coverage under the Affordable Care Act — something to consider about the consequences of public policy choices on health care.

 

2015-CG-5464Colin Gordon is Senior Research Consultant for the Iowa Policy Project.

cgordonipp@gmail.com

View from the low road

Absent action in Washington for a higher national minimum wage, the issue is in Iowa lawmakers’ court.

170330-minwage-map-NEIGHBORS2
Current (2018) minimum wage levels in Iowa and surrounding states — before 2019 adjustments in Missouri, Minnesota and South Dakota.

It’s that time again, when low-wage workers in many states can count on a small New Year’s Day pay increase to keep up with inflation, or even a significant increase due to a change in the state minimum wage.

Iowa, you can sit this one out. Your state legislative leadership and your governor have felt no need to make sure the lowest-paid workers in our state can make ends meet.

David Cooper of the Economic Policy Institute has a good blog on what will be happening Jan. 1 around the country. His summary shows the low road runs through Iowa — which is interesting because throughout 2019, the presidential campaign will be running through Iowa as well.

Minimum-wage workers in two neighboring states get inflation adjustments next week, from $9.65 to $9.86 in Minnesota and from $8.85 to $9.10 in South Dakota. In Missouri, a ballot measure is scheduled to raise the wage from $7.85 to $8.60.

Iowa sits at $7.25, along with its low-road neighbor to the northeast, Wisconsin. While Nebraska and Illinois have no increase scheduled Jan. 1, both are above the national minimum wage, unlike Iowa, Wisconsin and Kansas.

When the candidates drop by Iowa looking for 2020 votes, they might not see a lot of the people affected by this issue. But that’s only because when Iowans are working hard at $7.25 or slightly above to put food on the table (as we have shown elsewhere, 84 percent of those who would gain from an increase in the minimum (to $12) are over the age of 20, and about a quarter have children) there’s not a lot of time to attend campaign events — or, for that matter, the Iowa caucuses.

While the candidates drop by Iowa looking for 2020 votes, they might not see a lot of the people affected by this issue. Because when people are working two jobs at $7.25 or slightly above there’s not a lot of time  to attend campaign events — or, for that matter, the Iowa caucuses.

Will anyone be speaking up for them?

Iowa has not raised its minimum wage since lawmakers in 2007 passed a two-step bump that raised Iowa to $7.25 on Jan. 1, 2008. Iowa has been stuck there ever since.

Iowa legislators refused in 2007 to index the rate to inflation. Had they done so, minimum-wage workers in Iowa would already be making $8.49 and presumably looking at a new increase Jan. 1. An $8.50 or higher wage would still be way too low to make ends meet working full time, as Peter Fisher and Natalie Veldhouse show in our Cost of Living in Iowa report — but better than the status quo and at least in the ballpark regionally.

Two weeks into the new year, the Legislature will be back in session and have new opportunities to address the disparity between wages and the cost of living, and the disparity between Iowa and its neighbors who have higher standards. Absent action in Washington for a higher national minimum wage, the issue is in Iowa lawmakers’ court.

M

Mike Owen is executive director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

 

Pale ‘I’ on white flag of surrender

oldcap-flowersChange the mascot from a hawk to a chicken. Bleach the black and gold out of that flag before cheerleaders run it past 70,000 people in the football stadium.

Iowa faces the greatest challenges perhaps in our lifetimes to higher education and lifelong learning opportunities. These challenges are fomented by a band of political opportunists who are driving down our public investments where they are most needed. In the face of these attacks, administrators at the University of Iowa quake in their otherwise comfortable chairs and do the bidding of those who would diminish or even destroy higher education.

Already weak pushing back against funding challenges that the Board of Regents blame for raising tuition, the UI this week announced plans to shut down seven educational centers and make reductions in 3 to 6 more. It was a unilateral decision and one done behind closed doors, with no input from those most affected — much as the Legislature and Governor have done in the last year and a half on a range of issues from workers’ rights to tax policy to local government authority.

Not surprisingly, a center serving working families — the Labor Center — is one that stands out on the list of planned closings. This comes a year after the gutting of collective bargaining, workers’ compensation and minimum-wage laws, and amid plans to destabilize public employee pensions.

As if that were not enough, the process itself has been appalling and not one that well serves the reputation of the University of Iowa.

The Labor Center director was called in from her earned vacation last Friday to have the newbie Law School Dean tell her the center is being closed, and that the announcement would come today (Thursday). After people dared to speak up about it in hopes of having an impact — something a university that champions critical thinking skills would welcome — the administration went ahead and announced the closings two days early.

A state university should model good governance, transparency and public involvement, especially when our Legislature and Governor do not. And when it fails for whatever reason, we must ask where Iowans can turn when they are looking for answers about laws that supposedly protect them in the workplace.

The Labor Center is one of those places, and the UI administration is taking it away. Three directors of the Labor Center have served on the board of directors of our organization, and our own exceptional staff has worked many times with the equally qualified and professional staff of this respected university center.

In short, we know first-hand of the value of the Labor Center. Why, we wonder, does the university administration not recognize that value and trumpet its work better?

It is reasonable to ask if the leadership of the University of Iowa will ever fight back against the powerful and greedy forces that have undermined it. Why would President Bruce Harreld, or the regents, put up with this never-ending assault on a once-proud institution? Are they even curious about how many people would stand with them if they stood up?

Absent a demonstration of pride and leadership into what a state university can be, a white flag of surrender is appropriate above Old Capitol, or the UI Hospitals, or the College of Law, or the Writers’ Workshop, or Kinnick Stadium.

If it makes you feel any better, put a big “I” on it. Make that “I” pale — maybe light gray — we wouldn’t want to be too bold or speak too loudly. Go Hawks.

2017-owen5464Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. He is a 1980 University of Iowa graduate and a member of the Professional Advisory Board of the UI School of Journalism and Mass Communication. mikeowen@iowapolicyproject.org
See more about attacks on higher education in Iowa and impacts of funding choices:
David Osterberg: “Too far for a tax-cutter”
Brandon Borkovec: “Tuition rising — Is anyone surprised?”

House tax bill backs wealthy

It’s the Middle-Class Mirage: The current proposal in the Iowa House backs the wealthiest, not Iowans in the middle.

Editor’s Note: As tax negotiations continue in Des Moines, the ultimate House plan has yet to emerge. This post is based on the latest House bill available.

The “middle class tax cut” proposed by the Iowa House is a mirage. For the vast majority of Iowans, much or most of the small reduction in income taxes is taken back by the increase in sales tax — the other part of the House bill.

Compared to what middle-income Iowans paid in state income taxes when they filed this month for 2017 — and what they would have paid in the future if federal taxes had not been cut — the income tax cut in House File 2489 amounts to about $100 on average. Those with income between $20,000 and $100,000 represent over half of Iowa taxpayers. But they will face higher sales tax payments averaging about $47 a year. The net savings will amount to about $4 a month — but that’s on average. For some, there will not be a savings at all.

Table 1. Top 1 percent would take over one-third of tax benefit
House Bill: Income Tax Reduction Compared to Pre-Federal Baseline*
Iowa residents, tax year 2023

Book1

*Reduction in taxes compared to projected tax payments in 2023 under Iowa law but without the effect of the Federal tax cut legislation.
Source: IFP analysis of Iowa Department of Revenue estimates

For those at the top — the 0.7 percent of Iowa resident tax filers with income over $500,000 — the story is different. The average tax cut is $6,852, offset by on average $224, or less, in sales taxes and leaving them with at least $6,600 in net savings.

And that small group of well-off taxpayers gets 36.4 percent of the total income tax cut.

While the top 1 percent gets a tax cut averaging 11 percent, the other 99 percent get an average cut of 4 percent. If sales taxes were taken into account, the results would be even more skewed.

Table 2. Effects of Sales Tax Provisions of the House Bill — Iowa residents

Book1b

Source: Institute on Taxation and Economic Policy, April 2018

2010-PFw5464

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

 

The elephant and the gorilla

Both an elephant and a gorilla are in the small rooms where citizens are crowded out of the discussion on massive, radical tax policy changes in Iowa.

The elephant is an image of Iowa taxes on business concocted by corporate-funded lobbyists and organizations that make a mockery of the concept of independent research and sensible analysis. Most people know it’s nonsense and political spin and if they don’t, they should — rather than repeating it.

So, instead of the nonsense, look at these two charts, with data drawn from annual reports by national business consulting organizations, that offer a look at Iowa’s state and local taxes on business. Both are quite simple and sensible calculations, of taxes paid by businesses. They show how taxes differ across the states as a share of the states’ economies (Ernst & Young), or as a share of pre-tax profits (Anderson Economic Group).

Note: State and local taxes together are the key with what legislators are doing, because state law effectively governs all state and local tax policy.

Ernst&YoungFY2016

Anderson

As you can see, Iowa ranks only 28th highest in one measure and 29th highest on the other — and in both cases is part of a very large pack comprising the majority of states. In reality, state and local taxes on business really do not differ much.

If the rankings really mattered, Iowa lawmakers and the Governor would be boasting about those real measures, using them to attract business. As IPPs Peter Fisher describes on our GradingStates.org website, other things matter more than taxes. Meanwhile, “business climate” rankings matter little.

On that same IPP-sponsored site, you can learn about the birth of the elephant — a common reference is to Iowa’s ranking of 40th best, which is merely an arcane and bizarre mix of factors that the corporate-supported Tax Foundation cooks into a nonsensical business tax climate index.

Now for the gorilla. It’s one you’ve heard from the Iowa Policy Project and Iowa Fiscal Partnership for many years: massive spending on tax credits for corporations with little or no accountability (see chart), and Iowa lawmakers longtime refusal to close corporate tax loopholes that could gain the state $60 to $100 million a year.

170411-biz_credits

Now, the Governor, unlike the Senate leaders, says we cannot afford corporate tax “reform” this year, but also says we need to wait on tax-credit reform. She says we need to review the credits first.

Likewise, the Senate plan calls for a review of tax credits during the interim between this session and next, while making several immediate changes without any explanation before the new review.

The common thread: Both the Governor and legislative leaders recognize there is outrage about reckless tax credit spending when actual needs are held back. They pat that gorilla on the head, say, “We’ll get to you soon,” and if history is a guide, they never will — not on the credits already shown to be most in need of reform.

These credits have been reviewed — and reviewed, and reviewed — by the nonpartisan staff of the Department of Revenue, which puts all the reports on its website for all to see. (Here and here.) Yet, the Governor and the Senate leadership demand a new review of tax credits.

Interestingly, no such review is demanded for the Senate tax plan itself, or was provided upon the introduction of the Governor’s plan, even though both would drastically alter our tax system. No data, little public input, ram it through, worry later about the consequences (or how to spin it).

In the end the question for our public leaders is whether they are focused on how we can provide essential public services better. You cannot provide them without revenue, and the Governor’s plan reduces and the Senate plan would gut revenues.

You can bet the folks running the kinds of businesses we want in Iowa know the difference between tax cuts that actually mean little to their business, and the value of smart policy that supports well-educated workers and a good quality of life for themselves, their families and their workers.

2017-owen5464Mike Owen is executive director of the nonpartisan Iowa Policy Project and director of the Iowa Fiscal Partnership. mikeowen@iowapolicyproject.org

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Full reports from national business consultants:

Ernst & Young, August 2017: Total state and local business taxes — state-by-state estimates for fiscal year 2016, page 12, Table 4, column 7 (TEBTR, taxes as a percent of gross state product).

Anderson Economic Group, Apri 2017: 2017 State Business Tax Burden Rankings, page 19, Exhibit III. State and local taxes paid by business, share of pre-tax gross operating surplus, 2015.

Related:

The Tax Foundation’s Waste of Time Index,” Peter Fisher, IowaPolicyPoints.org, October 17, 2017