Tax plan: Don’t be fooled

Living in Iowa, we know snow when we see it, and what’s coming from Washington is a snow job of devastating proportions.

Recognize the House Republican tax bill for what it is: a plan to add at least $1.5 trillion in federal deficits to make the rich richer, and hurt Iowa’s working and middle-income families.

How will we pay for those deficits? Some lawmakers have already made it clear they want to gut economic and health security of families who are already vulnerable.

On the block: Medicaid, food assistance and education from Head Start through college, just to name a few likely targets given recent attempts in Washington.

Inevitably, these kinds of service cuts ultimately will put pressure on our state government to respond, at a time when the state is already hard-pressed to meet current obligations.

Is that what Iowa lawmakers signed up for? If so, they neglected to campaign on it — on how they will choose who gets health care, which school districts will decimate their own staffs, and where parents might find preschool for their kids. There has been precious little to show us how they will assure educational opportunity for students in economically vulnerable families, or workers at mid-career who suddenly find themselves out of work.

Yet, all we’re hearing from the authors of the tax plan in Washington is that it helps middle-income families — all evidence to the contrary notwithstanding. And, largely, silence from the folks who will be the final arbiters in Des Moines when the time comes to make state-level choices.

It’s not like this snow job from the East was not in the forecast. Many have seen it coming. The nonpartisan Tax Policy Center estimated in September that $75,000 income households with kids would see only a $20 average tax cut in 2027 from the GOP tax framework at the time — compared to a $200,000 cut for millionaire households with children.

In addition, the nonpartisan Institute on Taxation and Economic Policy found over half of the benefits of that earlier plan in Iowa going to the top 1 percent, with less than 15 percent going to the bottom three-fifths of Iowans.

When the new plan burst from behind closed doors late last week, responsible analysis quickly showed impacts. The plan:

11-5-17tax-f1More details will become apparent in the coming days with further responsible analysis that we can hope will find its way into the public debate.

Those peddling the tax-cut spin are counting on people to tire of the debate and let these cuts happen. The stakes are no less critical today than they were the first time they were identified.

Bad policy is bad policy. Bad economics is bad economics. And the poor services that result, alas, are what they are.

2017-owen5464Mike Owen, executive director of the nonpartisan Iowa Policy Project

mikeowen@iowapolicyproject.org

127 Million New Reasons We Cannot Afford New Tax Breaks

Capitol-DSC_0119-7inThe Iowa Revenue Estimating Conference met Thursday and dropped its revenue estimate for the current fiscal year by $127 million.

The REC estimate projects Iowa to have lower receipts in the current year than in the budget year that ended June 30, by $2.5 million.

A common-sense approach to budgeting would leave one clear message above all others: Drop the talk about tax cuts. We cannot afford any more of them, and we need to double down on a focus on reining in the giveaways that are already on the books, running automatically outside the budget process.

Already:

  • Tax credits for business, when including the property tax credits from the 2013 commercial property tax giveaway bill, have more than doubled in just five years.
  • We leave tax loopholes unplugged at an annual cost of $60 million to $100 million — estimates by the Department of Revenue.
  • Iowa’s taxes on business already rank in the lower part of the middle of the pack nationally, as shown by Ernst & Young in the graph below. This directly contradicts the illusion painted by apologists for even lower taxes on business and more corporate welfare at the expense of lower- and middle-income working families.

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Corporations are not people; they are tools designed for the purpose of making profit. Some of their activities can serve a greater good, but this is not automatic. They will seek and take new tax breaks if allowed, no matter the longer-term cost to services that support a level playing field for business and greater opportunity and health for all.

Budget choices, on the other hand, reflect a moral purpose — choices that advance values we share as members of our various communities, our state and our nation.

Through that lens of Iowa values, and the added context of tight revenues due largely to reckless and unaccountable giveaways, and the reality that tax breaks don’t pay off in greater revenues under even tortured economic analysis, it is impossible to suggest that new tax breaks make sense.

There are approaches to tax reform that make sense. They start with principles that put fairness, public benefit and adequate revenues ahead of political power brokers.

Our state lawmakers have less than three months to get a grip on fiscal and economic reality and make that fit with traditional Iowa values that foster promise for everyone in our state.

2017-owen5464Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

Turning drainage districts into a solution

Drainage districts exist not to support polluters’ “health, convenience or welfare,” but are grounded in a principle of public good, the common good.

It is disappointing but perhaps not surprising that those charged with operating drainage districts in the state are rebelling at the thought that someone might expect them to act on behalf of the public.

A new Iowa Policy Project paper suggests answers to nitrate contamination of Iowa waters and the Mississippi River Basin exist within drainage districts that currently are part of the problem.

Our paper notes that drainage districts “short-circuit” natural conditions that can remove nitrates before water moves on. From the paper:

“It is clear from years of research and observations that nitrate contamination of our waterways is a direct response to the cultivation of annual row crops and it is exacerbated by artificial drainage. The infrastructure of drainage districts, in particular, creates conditions for mass collection and rapid transport of nitrate pollution into our waterways.”

In a Cedar Rapids Gazette story today, John Torbert of the Iowa Drainage District Association, says that drainage districts’ “sole purpose of existing is to drain excess water from the land.” That is a very incomplete understanding of their role.

What Torbert leaving out is the law’s requirement that districts will be set up (and other county-inspired actions taken on drainage) that are “conducive to the public health, convenience or welfare.” (Chapter 468.1) In fact, ironically, even his association quotes similar language from the next section of the state law on the front page of its own website (below),

That subsection, also cited and quoted in the IPP paper (page 4) puts a responsibility on drainage districts to be set up for the public good.

Note the language is not that these districts exist to support polluters’ health, convenience or welfare. Their existence is grounded in a principle of public good, the common good.

 

David Osterberg, founder of the nonpartisan Iowa Policy Project

dosterberg@iowapolicyproject.org

Alternative license plates — your choice?

The state of Iowa wants to redecorate Iowans’ vehicles with a new license plate design. And Iowans get a say in it — a public vote is underway on three options at the State Fair and online, here.

Nothing against the proposed designs that you can find at the links above, but we might want to consider alternatives that deal with critical issues facing our state:

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OK, so the last one is a shameless plug. But we have to find a way to work on the issues on the plates above it, so don’t be too hard on us. And, you can donate here, or by clicking on the license plate above.

 

2017-owen5464Mike Owen, Executive Director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

 

​Rushing to push Iowans off insurance​

Governor Reynolds and state legislators of both parties might want to consider how they would cope with the results of this legislation.

We have seen this film before. Legislators propose a new law that they claim will improve health care, but pushes millions off of health coverage, strips away protections in current law, tells cash-strapped states to pick up the tab, and gives big breaks to the wealthy who don’t need help.

Did you walk out of the theater the first two times? Will you stay for this one? More importantly, will our senators?

In the coming days we will get an analysis of the new Senate bill from the nonpartisan Congressional Budget Office (CBO). The analysis may come with little time in advance of a vote, as the Senate leadership is attempting to rush to a vote before the public, let alone Senate members, have a chance to fully evaluate it. (That is not new, either.)

We all need a sense of what to look for in the official analysis of the new proposal — not what Senator McConnell or Sunday morning-show spin-masters tell us the bill would do.

First, what is the comparison point? To understand the impact on Iowans, the comparison should be to current law, not just to previous proposals.

More than the minor changes it makes to the previous Senate bill, or how it differs from the House-passed bill, we need to know from the new official analysis how this bill differs from current law that has extended health coverage to tens of millions across the country, and some 200,000 in Iowa.

We know, for example, that about 150,000 Iowans are covered by only one piece of the Affordable Care Act (Obamacare), the Medicaid expansion, and that this number will be 177,000 in 2019 if the expansion is preserved.

However, the Medicaid expansion would effectively be eliminated under the new Senate plan, as in the previous, stalled Senate proposal and the House-passed bill. In none of these proposals do we see opportunities to further increase access to insurance for those who are most vulnerable.

In the end, isn’t that what we would expect health care reform to do? Provide more coverage, more efficiently, to all. Continual tweaks in the current and recent Washington plans don’t change a fundamental problem: Millions nationally, and hundreds of thousands in Iowa, would lose health insurance.

Put in stark terms: When people lose health insurance, they can lose access to health care. When that happens, they become sicker. Or they take on debt they can never overcome. Some die.

Ultimately, our state leaders in Iowa — the Governor, and state legislators of both parties — might want to consider how they would cope with the results of this legislation. Are they content with the U.S. Senate and House pushing more budget problems onto their desks, and to Iowa taxpayers? That is the choice Senators Grassley and Ernst will have in the coming days.

 

owen-2013-57Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City.

Contact: mikeowen@iowapolicyproject.org

Senate Health Plan Hits Rural and Older Iowans Hardest

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Plan would finance tax cuts for wealthy as 232,000 Iowans lose health coverage

PDF (2 pages)

By Peter Fisher, Iowa Policy Project

The overall effect is now clear for the Senate’s attempt to repeal and replace Obamacare — the Better Care Reconciliation Act (BCRA): It would cause millions to lose health insurance in order to finance tax cuts to the wealthiest Americans and corporations. The number of uninsured would soar in part because the BCRA cuts the subsidies that made health insurance affordable to millions of Americans, and in part because it would likely mean the end of the Medicaid expansion in Iowa and other states.[1] New estimates today show that 232,000 Iowans would lose health insurance coverage by 2022 under the BCRA. The percent of nonelderly Iowans who are uninsured would soar from 6.6 percent to 15.4 percent, reversing the gains achieved by the Affordable Care Act (ACA).[2] Nationally, 72 percent of those who would lose insurance coverage are in families with a full-time worker, as both the subsidies for purchase of insurance and the Medicaid expansion under the ACA provided insurance to low-wage workers whose jobs provided little in benefits.

The Senate bill would increase health insurance costs for many who now buy private insurance through the exchange or marketplace, and who receive subsidies in the form of tax credits under the ACA (Obamacare). It would do that by increasing premiums and reducing subsidies. Those premium increases would hit older Iowans especially hard, including those with incomes too high to qualify for subsidies, under either the ACA or the BCRA. That is because the ACA allows insurance companies to charge premiums based on age that vary only by 3 to1, while the BCRA increases that ratio to 5 to 1. Someone age 64, in other words, could be charged five times the premium charged a 21-year-old, instead of just three times. The result under the Senate bill would be lower premiums for the young, but substantially higher premiums for those who are older (but still under 65, where Medicare takes over.)

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The table above illustrates how the BCRA would increase health insurance costs for older Iowans, in urban counties and in rural counties. The table assumes that a 60-year-old Iowan purchases a Silver Plan, the lowest cost plan that qualifies for subsidies now under the ACA, in 2020. It compares the cost (the premium paid less the tax credit), first assuming the ACA is still in place, then assuming the BCRA has replaced it. The comparison takes into account both the increase in premiums due to the BCRA’s higher age ratio, and the reduced premium subsidies.

Statewide, the effect of the BCRA would be to increase the cost of a comparable insurance plan by $2,881 on average for a 60-year-old with an annual income of $20,000. The increase would range from $2,340 in the county with the lowest cost impact, to $4,640 in the highest cost county. For a 60-year-old with $40,000 income, the cost increase ranges from $3,630 to $5,940, with $4,177 the statewide average.

At $50,000 the impact of the BCRA more than doubles. That is because an individual with that income level still receives some subsidy under the ACA, but nothing under the Senate bill.[3] The net cost jumps up on average by about $10,100, and exceeds $14,000 in 17 counties. At $60,000 a year income, or any income higher than that, subsidies are not available under either the ACA or the BCRA. But premiums would have risen substantially under the BCRA because of the age ratio change. So any 60-year-old purchasing a policy in Iowa could expect to see costs rise by $3,000 to $5,000.

Because of the changing age ratio, some younger Iowans would see a net reduction in costs because of lower premiums. A 27-year-old Iowan with income over $30,000 would likely see a modest net savings of $250 to $350 per year on average, with that number rising to $850 in some cases. But if that person earned just $10.00 an hour, or the minimum wage, their net cost would increase by about $650 on average. Middle-aged Iowans (age 40) with modest incomes would also see an increase in net costs of insurance, even with an income of $30,000, of $400 to $900.[4]

The table also shows that the net increase in costs is higher in rural counties than in Iowa’s 21 counties that are part of a metropolitan area. This results from the higher cost of health care in rural Iowa.[5] This differential rural impact applies as well to the case of the 40-year-old, regardless of income, and to the 27-year-old with lower income.

The upshot: If you are between about 55 and 65, the BCRA would drive up your health insurance costs dramatically, regardless of your income. If you are a low-wage worker, especially if you live in a rural area with higher health insurance costs, you would also face higher net premiums to purchase insurance. Those higher costs will drive some to go uninsured, most likely the healthiest, which will once again threaten the viability of the insurance market.

[1] Iowa Policy Points blog, Iowa Policy Project, June 26, 2017. https://iowapolicypoints.org/2017/06/26/any-way-you-cut-it-americans-lose-health-coverage/

[2] Linda Blumberg et al. State-by-State Coverage and Government Spending Implications of the Better Care Reconciliation Act. http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2017/rwjf438332

[3] The ACA ends subsidies at 400 percent of the federal poverty level ($50,100 for an individual) whereas the BCRA ends subsidies at 350 percent of poverty or $43,875.

[4] The estimates in this paragraph are also based on population-weighted county figures from the Kaiser Foundation report cited below the table.

[5] The ACA bases subsidies on a silver plan, whereas the BCRA bases it on a bronze plan, which covers a substantially smaller share of health care costs (58 percent instead of 70 percent), generally through higher deductibles and co-pays. To make a fair comparison, we assumed the same quality Silver plan was purchased. The additional premium required to get a sliver instead of a bronze plan is entirely at the individual’s expense under the BCRA, and that expense is generally higher in rural areas.

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Peter Fisher is research director at the nonpartisan Iowa Policy Project (IPP). The Iowa Fiscal Partnership is a joint public policy analysis initiative of IPP in Iowa City and the Child & Family Policy Center in Des Moines. Find reports at http://www.iowafiscal.org.

Running against the wind?

In his visit to Cedar Rapids, President Trump rallied his supporters on many issues including energy production. His message Wednesday was not a typical one in wind-producing Iowa.

The President highlighted the opening of a coal mine in Pennsylvania last month as an example of how he was bringing back the coal industry. “I don’t want to just hope the wind blows to light up your house and your factory as the birds fall to the ground,” he stated.

Concern for the fate of avian wildlife is refreshing for a president who recently rolled back regulations that prohibit the dumping of excess spoil into streams near surface mining operations, and who proposed drastic cuts to the budget of the U.S. Environmental Protection Agency.

Given a frequently stated concern of the president — for job creation — he might want to acquaint himself with the economic value of wind energy production in Iowa.

On March 30, 2017, the Iowa Policy Project reported that Iowa produces more electricity from wind per capita than any other state, and has lower average electric rates than when the industry started. Our findings show that the state’s leadership in renewable energy production has not come at great expense to ratepayers.

“Contrary to some of the warnings we heard two decades ago, the growth of wind power to 36 percent of the electricity we use in Iowa has not hurt our competitiveness in attracting businesses. It has not hurt our efforts to keep household spending for electricity under control,” said IPP’s founder and lead environmental researcher, David Osterberg.

Additionally, the wind energy industry provides well-paying jobs that support a number of families in rural Iowa where local economies are hurting. A technician salary starts at $24.50 per hour, which is very good money in rural Iowa. See IPP’s 2003 report, “Wind Power and Iowa Economy.” It found:

“Wind-powered electricity adds slightly more jobs and economic output to the Iowa economy than coal and natural gas. Furthermore, this homegrown source of electricity offers a new cash crop to farmers, spurs the development of new industries (such as turbine manufacturers and maintenance companies) as well as existing industries, and provides stable energy prices.”

While U.S. coal industry is on the decline both in production and consumption, the wind energy industry keeps growing worldwide.

Wind energy might just be an answer President Trump is looking for.

2017-sg-166177Posted by Sarah Garvin, IPP Research Associate

sgarvin@iowapolicyproject.org