Join us Sept. 15 to celebrate IPP’s 15th anniversary

The Iowa Policy Project is 15 years old and we’re having a party. Join us for our anniversary reception and help us move forward to the next 15!

Bill Stowe on clean water • Peter Fisher on work supports •
and more!

THURSDAY, SEPT. 15 • 6 P.M. • RECEPTION
PRAIRIE MEADOWS CONVENTION CENTER • ALTOONA

Hors d’oeuvres, cash bar — 6 p.m. • Program — 6:45 p.m. to 7:30 p.m.
Tickets $50 per person • Sponsorships available • RSVP TODAY!

Featuring: Bill Stowe, Des Moines Water Works
Hear from the CEO and General Manager of Des Moines Water Works, one of Iowa’s most prominent advocates of clean water stewardship.

Sneak Preview: The Cost of Living in Iowa Part 3 — Work Supports
IPP Research Director Peter Fisher will offer a peek at upcoming analysis of how Iowa can enhance eligibility for child care assistance so that working families are not penalized if they work more or achieve a slight boost in pay.

Special recognition by co-founder David Osterberg of early IPP supporters
Mark L. Smith, G. David Hurd and Fred and Charlotte Hubbell

And a silent auction you won’t want to miss!

RSVP today — download this response form to order tickets or become a sponsor.

INDIVIDUAL TICKETS: $50 per person

INDIVIDUAL SPONSORSHIPS:
LOOPHOLE CLOSER — $1,000 and above
POLICY WONK — $500 to $999
RESEARCH ASSOCIATE — $300 to $499
JOB COUNTER — $200 to $299

ORGANIZATION SPONSORSHIPS:
PIE ENLARGER — $5,000 and above
PLAYING FIELD LEVELER — $2,500 to $4,999

Give us a call at (319) 338-0773 for more information. Thank you!

ALEC Lauds Tax Cutting States

Once again ALEC is pushing its discredited notion that tax cuts are a potent tool to promote state economic growth, defying the preponderance of serious research.

Once again the American Legislative Exchange Council, or ALEC, is pushing its discredited notion that tax cuts are a potent tool to promote state economic growth. While the preponderance of serious research indicates that cuts to a state’s income tax or its business taxes have little positive effect on a state’s economy, and may well prove harmful to the long term prospects for growth and for increased prosperity, ALEC continues to push its anti-tax anti-government agenda. The latest effort is its State Tax Cut Roundup for the 2015 legislative session.

ALEC lays out in this report its principles of good tax policy, based for the most part on standard economic principles of taxation (transparency, simplicity, neutrality, fairness, reliability, and revenue adequacy), plus the need for balance between state and local governments, and its favorite: pro-growth policies, or economic competitiveness. As in other ALEC reports on tax policy, however, the discussion here is exclusively on ALEC’s notion of pro-growth tax policy — tax cuts of pretty much any variety. It is, after all, the Tax Cut Roundup, but there are no corresponding ALEC reports called the “State Tax Fairness Roundup” or the “State Tax Revenue Adequacy Roundup.”

The recent experience of Kansas should be caution enough against tax cutting as economic policy. For advocates of income tax cutting, Kansas was to be the poster child. Governor Sam Brownback signed legislation in 2012 slashing income taxes and cutting the state budget by over 13 percent. The tax cuts had been pushed by Stephen Moore and by Arthur Laffer, author of ALEC’s Rich States, Poor States, who argued they would provide an “immediate and lasting boost” to the economy. But instead of boosting the economy, Kansas GDP actually declined by 1.1 percent in 2013, the first year of the tax cuts, while nationally GDP grew at 1.3 percent. In 2014, Kansas growth once again lagged the nation, 1.4 percent versus 2.2 percent. Estimates for 2015 show the trend continuing, with state GDP growth expected to be just half of the national rate. Read more.

That the underlying ALEC agenda is to shift taxes from upper to lower income groups becomes clear when one contrasts its statement of tax fairness in the State Tax Cut Roundup with the tax policies ALEC actually favors. The principle stated by ALEC is: “The government should not use the tax system to pick winners and losers in society, or unfairly shift the tax burden onto one class of citizens. The tax system should not be used to punish success or to ‘soak the rich,’ engage in discriminatory or multiple taxation, nor should it be used to bestow special favors on any particular group of taxpayers.”

So how do ALEC’s policy prescriptions stack up against the concept of fairness? A state tax system that did not alter the distribution of income, as ALEC supposedly favors, would be a proportional system: It would take the same percentage of income from every income group. However, most state tax systems are regressive: They take a larger percentage of income from lower income groups, because they are dominated by sales, excise and property taxes, and an income tax generally of only modest progressivity.

Yet ALEC invariably applauds income tax cuts, which would make a state’s system more regressive, moving the state further from the goal of neutrality with respect to income distribution. Apparently shifting taxes from upper to lower income groups is the fair thing to do according to ALEC.

 

2010-PFw5464Posted by Peter Fisher, Research Director of the Iowa Policy Project
pfisher@iowapolicyproject.org
Peter Fisher is professor emeritus of Urban and Regional Planning at the University of Iowa. A nationally recognized expert on economic development issues and tax policy, he authored two “Grading Places” books that examined business climate rankings by various organizations, including ALEC. From this research, Fisher and the Iowa Policy Project have developed a new website, Grading the States, at gradingstates.org, to permit timely tracking of such studies and offer context to those wishing to review them. The post above is a version of a recent post by Fisher on the Grading the States website.

School money: Big deal (not really)

Finally, after these many months — 13 months past the legal deadline — Iowa lawmakers have decided what schools are going to receive for the next budget year.

A Des Moines Register story on the deal included this:

House Speaker Linda Upmeyer, R-Clear Lake, added this will be the sixth year in a row that schools have received an increase in funding.

Big deal. As if there’s any question that there should be an increase every year. As if any increase, no matter how small, is something schools should celebrate. Especially when you recognize that not all schools receive an increase.

This deal leaves Iowa at around 2 percent per-pupil spending growth, on average, for the last seven years. Understand that a 2.25 percent “Supplemental State Aid” number does not mean all schools get even that meager amount of growth.

For many districts that have declining enrollment, the increase will not keep their budgets where they stood for this year. That means property tax increases. This, from the folks who tell you throughout their legislative campaigns and at Saturday morning coffees that the sun rises and sets on the idea that we have to cut property taxes. These very same legislators are forcing property tax increases for dozens of school districts.

Education is underfunded in Iowa. Education is not the priority, even if it is the greatest share of spending, because it is not funded in a way that reflects any strategic thinking.

If it were, education funding would be the first item determined in the legislative session — for the following budget year, as the law requires.

As it stands, the new number is coming less than one month before school districts certify their own budgets (they don’t get a pass on their April 15 deadline). And the number for FY2018, which was supposed to have been set a month ago, remains an open question and may well not be determined during this legislative session.

Once again Iowa lawmakers have decided that the first priority that needs their attention is figuring out who gets tax breaks. Education then has to fight for what is left over.

It’s not enough to keep up with the bills, and it’s not enough to make sure that we are paying what is necessary to assure we can keep great teachers in the profession, and attract potentially great teachers to the profession.

Owen-2013-57Posted by Mike Owen, Executive Director of the nonpartisan Iowa Policy Project.
mikeowen@iowapolicyproject.org
Mike Owen is a former journalist in Iowa and Pennsylvania. He has been a member of the West Branch Community School Board since 2006.
What it looked like last year:

Budgeting in the dark — April 13, 2015

Coupling — singling out the winners

And guess who they are? Not schools

We always seem to have money for a business tax break, but not for schools. Last year legislators approved just a 1.25 percent increase for schools, a move made a little more responsible by the addition of $56 million in one-time money for this fiscal year. But the Governor vetoed the $56 million because it was one-time money.

Fast forward to this week: the Legislature just approved $98 million in retroactive tax breaks, most of it for businesses, coming out of this year’s budget surplus — the same source of one-time money that the Governor claimed couldn’t be used for schools. The Governor has said he agrees with the tax breaks.

The $98 million would be the cost of “coupling,” which means the state would go along with selected changes in the federal tax code. It would do some sensible things, but others — not so much, and not for the reasons being promoted.

In the end, this is just one more giveaway to business. Cynically, one legislator pronounced this as a move for “fair tax policy.”

In fact, coupling was agreed to as a condition to set school funding already 13 months past the legal deadline. Those talks may now resume.

There has not been a move to enhance fairness for working families in the Iowa tax code since passage of an expanded Earned Income Tax Credit in 2013, and all general changes in Iowa’s income-tax structure over the last 20 years have been heavily weighted toward the wealthiest.

As to the merits of the “tax coupling” legislation, the spin runs very hot and heavy.

One senator claimed this bill is designed to let taxpayers “make the decision on where to best invest their dollars.” No, it’s not.

Businesses already made their decisions last year on where best to invest their dollars, without benefit of the tax break. All the bill does is give them a subsidy after the fact for decisions already made on their own merits, rather than for tax reasons.

We know this because the federal changes, on which the new state breaks are based, were not approved until December of 2015. If any small business made a decision to buy a big piece of equipment in, say, April or October of last year, they could not have assumed they would have a state tax break for it. The funds for the state break were not budgeted. Governor Branstad didn’t plan on it last year, and neither did the House or Senate.

Perhaps the most disingenuous defense of the coupling bill is that it is needed to help thousands of public school teachers who have to purchase their own supplies. The most any teacher could get out of this bill is $22. Is there any teacher in Iowa who would prefer $22 to adequate funding of schools?

We elect a Legislature to make choices with public money about spending on public priorities. It’s part of being a statewide community.

Now it’s $98 million for “coupling.” It’s not hard to see that education could have had this funding all along as part of the regular budget formula. And $98 million is equivalent to about 2 percent in supplemental state aid for schools, which has been held below 2 percent on average over the last six years.

Once again, we see the ascendancy of business tax breaks above what has long received lip service as the first priority of state government: education.

Posted by Mike Owen and Peter Fisher

Owen-2013-57Mike Owen is executive director of the Iowa Policy Project. A former journalist, he has been a member of the West Branch Board of Education since 2006. mikeowen@iowapolicyproject.org

2010-PFw5464Peter Fisher is research director of the Iowa Policy Project. He is professor emeritus in the University of Iowa School of Urban and Regional Planning. pfisher@iowapolicyproject.org

Another voice: Subsidizing Server Farms in Iowa

Iowa throws a lot of money at the server farm industry, even though the state’s assets would make it attractive for the industry even without lucrative subsidies.

by Kasia Tarczynska, Good Jobs First

Facebook just announced a third expansion of its $1.5 billion data center in Iowa. This followed a similar move by Google for its server farm in the state. These developments are fruits of the effort by officials to encourage big-name tech companies to locate in Iowa. This private investment, however, does not come free. For example, the $1 billion Google expansion is supported by $19.8 million in state subsidies. Since 2007, Iowa has offered almost $100 million in state tax credits and refunds to Facebook, Google, and Microsoft.

Google data center facility in Council Bluffs, Iowa. Credit: Google

Google data center in Council Bluffs, Iowa. Image via Google

Subsidies to server farms raise a lot of questions and controversy.  A key issue is whether the tech companies should get subsidies at all, given that their location decisions are based primarily on the availability of cheap electricity (preferably renewable), plenty of land, cooler climate, access to water, and lack of natural disasters. These make places like Iowa seem a natural choice.

Because data centers are capital intensive projects, they usually create a small number of jobs and thus per-job subsidies tend to be quite large.

Despite these factors, Iowa still throws lots of money at the industry.  Here is a quick look at Iowa’s subsidies to the three tech giants:

Google, located in Council Bluffs

2007- The company received $1.4 million in state tax credits and $48 million in local property tax abatements. Google was the first big-name tech company to locate a data center in the state.

2013 – The Iowa Economic Development Authority approved another $16.8 million in tax credits for a second Google facility.

2015 – The company received an additional $19.8 million in state sales and use tax refund for an expansion. Google will also pay only 20 percent of local property taxes for 5 years.

Altogether, Google promised to invest $2.5 billion but create just 70 jobs.

Microsoft, located in West Des Moines

Microsoft’s state subsidies started on a small scale, $568,000 in 2008 and $131,242 in 2011.

2013 – The company was awarded $20 million from the state’s High Quality Jobs Tax Credit program for a $679 million investment.

2014 – EDA approved $20.3 million in state tax credits to Microsoft for another round of expansion. The city chipped in $18 million for construction and infrastructure improvements on the site. $3.5 million in Tax Increment Financing was committed to build a water facility that will be used by Microsoft, and others, to cool servers.

Facebook, located in Altoona

2013 – After an intense and secretive competition with Nebraska, Iowa won Facebook’s server farm.  The company was approved for $18 million in tax credits for creating 31 jobs and investing $1.5 billion (the EDA report lists Facebook under Siculus, Inc, a Facebook initiative). The company also enjoys discounted water rates and has received money through Tax Increment Financing.

There is one additional thing that stands out: Google, Microsoft, and Facebook are rich tech companies that easily can afford any costs related to construction and operation of those server farms.  As one journalist put it: “Google needs a tax break like Bill Gates needs food stamps.”

Kasia Tarczynska is a research analyst at Good Jobs First, http://www.goodjobsfirst.org. She has a Masters in Urban Planning and Policy from the University of Illinois at Chicago. This blog originally appeared on the Good Jobs First blog at this link.
Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families.

Where have you gone, Henry A. Wallace?

Iowa and national leaders should follow Wallace’s example, and confront climate change just as Wallace and and other leaders of his day overcame the Dust Bowl and Depression of the 1930s.

A call to leadership on climate change

437px-Henry_A._WallaceRepublican Henry A. Wallace was Secretary of Agriculture in Democratic President Franklin Roosevelt’s cabinet. In a Sunday column in the Cedar Rapids Gazette, Wallace’s grandson makes the case that his grandfather — an Iowan and a crop researcher — would put science ahead of politics to respond to climate change. He would recognize climate change endangers all of us — farmers included.

Solutions are more important than politics, but right now politics is blocking what science is teaching us. With climate change upon us, the oil industry still is able to set — or block — policy that could turn back this frightening attack on our economy and environment.

As an Iowan, a scientist and a political leader, Wallace would point out that Iowa exports include renewable fuels and wind power as well as corn and hogs. Climate science also fits with Iowa economic advantage.

Each new scientific study warns us that a policy of more digging of coal, more fracking for oil will be lead us to more problems. A recent letter signed by 180 researchers and teachers at 36 Iowa colleges and universities make that point that climate change is already adversely affecting the state.

Iowa and national leaders should follow Wallace’s example, and confront climate change just as Wallace and and other leaders of his day overcame the Dust Bowl and Depression of the 1930s. Let’s put science over politics.

Posted by David Osterberg

IPP-osterberg-75Osterberg, co-founder of the nonpartisan Iowa Policy Project, is a professor of occupational and environmental health at the University of Iowa. He is one of 180 scientists and teachers who signed the Iowa Climate statement, available here.

Also see his recent blog: Climate change impacts showing up now

And see the Cedar Rapids Gazette column by Henry Scott Wallace: What would Henry A. Wallace do?

Tackle the real question on erosion and pollution

An article tying erosion to corn production for ethanol has caused commotion in the heartland. The AP article was front page on the Tuesday, November 12, Des Moines Register and the story jumped to two full pages inside. The corn growers and Secretary of Agriculture Tom Vilsack are furious. Why? The AP story points out that high corn prices and a lack of regulation on how farmers farm has caused some bad effects on the land. The story blames ethanol and the Obama administration for mandating we use more and more of it in our vehicles.

It is true that ethanol takes much of the U.S. corn crop (44 percent, according to the story). That is one factor in high corn prices. It is also true that high corn and bean prices can cause more erosion, more Phosphorus into streams, more Nitrogen in the water — so much that Des Moines must treat its river-source water to make it into a drinkable supply.

One example in the story is notable. “In Wayne County, a gravel road once cut through a grassy field leading to a hilltop cemetery. But about two years ago, the landowners plowed over the road. Now, visiting gravesites means walking a path through the corn.” I have no doubt that happened. You can see bad land practices everywhere.

More land that used to be seeded down, and somewhat safe from erosion and chemical runoff, has become corn and bean fields. The Farm Bureau organizations in seven Midwestern states did a recent study on conversion and found that about 8 million acres changed from being seeded down to producing row crops. Of that, 1.2 million acres in Iowa were converted from grassy habitat to corn and beans. For six months of the year, row-crop ground is bare and subject to rainstorms that cause erosion and chemical runoff.

Wrong question

But the AP story goes after the wrong question. The mandate that more of our automobile fuel must come from ethanol has certainly had something to do with high corn prices — but so do the recent droughts and the fact that more people in the third world are eating better. Yes, the price of corn matters. But so does the lack of regulation. Growers can wreak destruction at will in their drive to plant more acres.

We often hear that “the enemy of my enemy is my friend.” And the ethanol industry is the enemy of the oil and gas industry, so I want to be on the side of ethanol, not Big Oil. Talk about destructive practices. Fracking. Deep Water Horizon. Do I have to remind you?

But how can we have economic development in Iowa and become less dependent on oil? Ethanol doesn’t have to be a problem. We can do something about how the land is farmed. We could mandate buffers along every stream and lake in Iowa. Pass a law and mandate it. Industries cannot legally dump waste into a river, so why should farmers be able to farm the land in a way that soil and agricultural chemicals go into the same river?

However, we don’t have to go that far. The five-year renewal of the U.S. Farm Bill is now in a conference committee between the House and Senate. The Senate version requires any farmer getting a subsidy on crop insurance to comply with certain environmental restrictions. The House version takes the position that this is just more regulation and the American people should shut up, give farmers $10 billion per year in insurance subsidies and let them plant over roads to cemeteries as they choose.

The issue is simple. If you want ethanol from corn, ask our government to make sure the corn is grown responsibly.

IPP-osterberg-75  Posted by David Osterberg, Founding Director of IPP

 

Hear Osterberg discuss this issue with KVFD-AM’s Mike Devine on “The Devine Intervention.”