Watching the stars from the deck of the Titanic

170118_capitol_170603-4x4The people who will lead the charge against fairly derived and only fairly adequate revenues have been giving folks a taste of what’s coming in Iowa tax policy in 2018.

If you like the current debate in Washington over tax cuts that benefit the wealthy at the expense of services for the vulnerable or investments in opportunity for all, you’ll love the coming debate in Des Moines.

Yet, the language of opening shots already is fascinating.

A Titanic analogy is apt.

Senate Majority Leader Bill Dix says the debate will be about “relief,” not “reform.” “Reform implies that it might be a moving of chairs on the deck and that’s not what we should be pursuing.”

His reference is a familiar nod to the idea of “moving the deck chairs on the Titanic,” a fruitless activity, ironically apt for the agenda he is pursuing — an agenda that includes the radical and fiscally incompetent notion of eventually eliminating the state income tax. What dooms prosperity for the state of Iowa is continuing to fail to invest adequately in the key drivers of the economy where state policy can have an effective impact. True “reform” would correct that.

In contrast, the stated Dix plan is to reduce reliance on the income tax, which is already less than one-third of state and local revenues. The income tax is the only piece of that structure where low- and moderate-income Iowans pay a smaller share of their sometimes meager income in tax than those in the top 20 percent. The property tax and sales taxes are weighted in favor of the wealthiest.

Tax cuts guarantee lower revenues, a reality noted in the current federal tax debate. Lower revenues also mean fewer or lesser services. Think education. Think health care. Think law enforcement. Think clean water, recreation, and quality of life. These are all Iowa assets driven by public investment, on which private businesses thrive and with which businesses make their decisions on where to locate, unlike taxes.

Whatever they are, they’re not “stars.”

Rep. Jake Highfill says “all the stars have aligned” for tax cuts. Stars are bright and shiny. Dreams are made, courses to achievement are set, upon stars.

What have aligned, rather, are the pieces of brute political power. We have seen this already in 2017. The gutting of public-sector collective bargaining rights and worker’s compensation, and eliminating county minimum wages last session, demonstrated a willingness to use the levers of power on behalf of powerful lobbyists in complete disregard for facts, fair play, open debate and traditions of Iowa governance.

Promises don’t mean much.

Cities and counties were assured the state would “backfill” revenue lost to what then-Governor Branstad and legislators proclaimed as the largest tax cut in Iowa history — the 2013 property tax bill. And for a short time they have, making a huge dent in what state funds are available for the investments noted above.

Slower-than-forecast revenue growth now puts that “backfill” in jeopardy. Highfill said last week he would favor “phasing it out or getting rid of it altogether.

Cities and counties were wary of this from the start. Clearly, they had good reason.

Principled tax policy would assure, among other things, adequate revenue, with taxes paid most by those who can most afford to pay. We don’t have either as it stands. The changes appearing on the horizon would only compound the problems in Iowa’s existing structure, which is heavily weighted toward the wealthy and corporations, and against lower- and middle-income working families.

You’re not likely to have a say in what happens before a plan hatched behind closed doors is dumped on the House or Senate floor, whipped through the chambers and sent to the Governor before everyone goes home to campaign.

Lawmakers won’t want to spend a day longer than their taxpayer subsidy permits this spring.

So, brace yourself. Start by securing your deck chair.

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

 

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.

171021-E&Y2016

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:

Basic RGB

Basic RGB

LICENSE-ALT2-03.jpg

Basic RGB

Basic RGB

Basic RGB

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

IOWA FISCAL PARTNERSHIP BACKGROUNDER

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.)

Basic RGB

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.

———

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.