Today’s virtual House graphic: The real business of business taxes in Iowa

The secret is out: Iowa’s business taxes are low

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One of many measures showing Iowa to be low or in the middle of the pack on business taxes is a study by the business consulting firm Anderson Economic Group. In its 2016 business tax rankings, Anderson ranked Iowa business taxes fourth-lowest.

In that analysis, Anderson looked at 11 taxes on business, and examined more than tax collections, but also how taxes paid by business compared to income available to pay the tax. Anderson said it used “taxes paid as share of profits, as this measure directly compares taxes paid to business income available to pay the tax.”

In fact, by the Anderson measure, Iowa ranks below all of its regional neighbors except South Dakota, which is lower only by one-tenth of a percentage point.

This finding is not unusual despite claims from the business lobby about Iowa taxes on business, as we have shown before. The latest examination by a widely known business accounting firm, Ernst & Young, puts Iowa state and local business taxes in the middle of the pack and below the national average, at 4.5 percent of private-sector GDP.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. Here is today’s graphic, to illustrate where Iowa rates vs. other states, by responsible measures, on business taxes.

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

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

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

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

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

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

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

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

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

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

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

When democracy is not enough

For public workers, long-accepted notions of electoral fairness in America do not apply.

170118_capitol_170603-4x4The governance issues raised by the anti-bargaining bill that just passed the Legislature are many, some in the process, and some in the new legislation itself.

An excellent synopsis of the impact of the onerous recertification requirements for bargaining representation is in a letter to the editor published in the Mason City Globe Gazette.
In that letter, Jason Enke of Clear Lake outlines what elections would look like for the representatives supporting the bill if the same requirements applied to their re-election campaigns:
This is what it would look like for them:
  • Each year, any legislator seeking to continue representing their constituents must submit a petition signed by at least 30 percent of their constituents in order to be placed on a ballot.
  • If they complete a successful petition, an election will be scheduled with the legislator themselves paying all costs of the election upfront.
  • Any eligible voter who does not vote in the election will have his or her vote counted as a vote against the legislator.
  • If there are multiple choices on the ballot, a legislator must receive the vote of a majority of all eligible voters.
  • If none of the choices on the ballot receive a majority vote, there will not be a runoff election. Those constituents will not be represented.
  • Furthermore, if a legislator loses an election and constituents are unrepresented, another election for that district will not be considered until a period of at least two years has passed from the last election.

Currently, by contrast, it is incredibly easy to get on a ballot for the Iowa Legislature — only 50 signatures for a state House seat, and 100 signatures for a state Senate seat. All costs of a legislative election are paid by public funds. If people do not vote, they are not considered in the outcome. To elect takes only a plurality, not a majority, of those voting, not those eligible or even registered. Those who are interested enough to vote make the decision. Deadlines are set in the Iowa Code for filling vacancies in legislative seats to assure people are represented when decisions are made for them.

None of what was mandated for public workers in Iowa is good enough for the majority of state legislators who passed the anti-bargaining legislation that Governor Branstad signed into law last week. For workers who want team representation of their position when they negotiate compensation to provide services to fellow Iowans, long-accepted notions of electoral fairness in America do not apply.

 

owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

Today’s virtual House graphic: Big checks, no taxes

Iowa’s lucrative research subsidy provided as much in 2016 to companies that do not pay Iowa state income tax as legislators recently approved as an increase in state school aid.

Editor’s Note: The Iowa House of Representatives now denies the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, on several days this session we are offering examples. Here is today’s graphic, to illustrate the cost and nature of Iowa’s tax subsidies to companies to do research.

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Iowa’s lucrative research subsidy provided as much in 2016 to companies that do not pay Iowa state income tax as legislators recently approved as an increase in state school aid.

Unlike the typical use of a tax credit, the Research Activities Credit (RAC) is refundable and provides a check to the recipient for the amount of the credit not needed to erase taxes. In other words, if the company does not owe income taxes and has a research credit, it gets a check for the amount of the credit remaining.

A new report from the Department of Revenue (DOR) shows that in 2016, 207 corporate refunds were issued totaling $40.4 million (see graph above). Corporate claimants used another $8.7 million from the credit to erase tax liability, leaving the total cost of the corporate credit at $49.1 million.

For context, Iowa lawmakers this session provided $40 million as an increase in state aid for local school districts, defending the 1.11 percent increase as all the state could afford.

In most cases, beneficiaries of this tax credit and the tax credit “refunds”* are very large companies, DOR reports show. The graph above shows the overall cost of corporate claims on the RAC (beige), with the blue share of the bars showing the share of corporate claims paid out in checks to companies that paid no corporate state income tax to Iowa.

For more information and a list of companies that benefited from over $500,000 in RAC claims in each of the last seven years, see this Iowa Fiscal Partnership news release.

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* To refresh, these tax credit “refunds” are not refunds of taxes paid above what was owed, but of tax credits that exceed the amount of taxes owed. In 2016, the share of these research tax credits paid as “refunds” accounted for $4 out of every $5 of the cost of the credits.

For more information about Iowa tax credits and breaks for business, see this page on the Iowa Fiscal Partnership website: http://www.iowafiscal.org/category/research/taxes/tax-credits/

See also this related “Virtual House graphic” on Iowa’s growth in tax credit spending.

 

Kansans deliver tax-cut cautions for Iowans

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

Repeal of the Affordable Care Act will leave fewer people in Iowa with insurance than before the law took effect.

Editor’s Note: The Iowa House of Representatives voted Monday to deny the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, we will offer examples. Here is today’s graphic, to illustrate what could be expected to happen in Iowa if Congress repeals the Affordable Care Act.

170119-IFP-ACA-F2xxRepealing the Affordable Care Act (ACA) without an adequate replacement, as Congress and the incoming Trump administration appear poised to do, jeopardizes the health care coverage and economic well-being of the most vulnerable Iowans. About 230,000 fewer Iowans would have health coverage in 2019 if the law is repealed, including 25,000 children.

In fact, repeal of the ACA could leave tens of thousands of adults uninsured who actually had insurance prior to the ACA. Some 69,000 Iowans covered by an Iowa program, IowaCare, became part of the Iowa Health and Wellness Program with the advent of the ACA, while even more Iowans had insurance with the help of ACA subsidies.

Repeal leaves all three of those programs gone — IowaCare, Iowa Health and Wellness, and the ACA subsidies. Thus, fewer will have insurance than in 2013, prior to the ACA, and low-income Iowans will be worse off. This is an issue that state legislators may be left to address with no help from the U.S. Congress, but is not getting attention at the Iowa Statehouse.

For more information, see this Iowa Fiscal Partnership policy brief by Iowa Policy Project Research Director Peter Fisher.

Today’s virtual House graphic: Cutting wages in four counties

Local minimum wage ordinances cover one-third of the private-sector workers in the state of Iowa.

Editor’s Note: The Iowa House of Representatives voted Monday to deny the ability of lawmakers to use visual aids in debate on the floor. To help Iowans visualize what kinds of graphics might be useful in these debates to illustrate facts, we will offer examples. Here is today’s graphic, to illustrate where county-level minimum wages have passed and could be repealed.

Iowa 03-BLUE-countiesxljpIowa Policy Project reports have illustrated the impacts of increases in the minimum wage if enacted at the state level or, in some cases, at the local level. Four counties have enacted minimum wage increases in Iowa, with the Johnson County wage of $10.10 taking effect in three steps and fully implemented last month. Polk, Linn and Wapello counties also have passed county-level minimums.

If the state Legislature were to choose to repeal those local minimums, it would affect one-third of the private-sector workers in the state of Iowa. For more information about the minimum wage in Iowa, visit this page, and this blog post by IPP’s Peter Fisher.