Who ‘gets it’ on estate tax? This fellow does

Return the estate-tax debate to the real world.

One former congressman gets it. We will soon find out how many of our current members of Congress do as well.

Former U.S. Congressman Berkley Bedell from northwest Iowa writes in today’s Des Moines Register that eliminating the estate tax would compound tax policy mistakes that only allow the super-rich to get richer and richer.

On an issue distorted beyond recognition by emotional, inaccurate and at best disingenuous arguments made by those who would do away with the estate tax, Bedell is a breath of fresh air.

In his column, Bedell offers the relevant questions:

Do we want to properly pay our teachers and make it possible for our young people to attend college regardless of their family’s wealth? Do we want to build an economy where common people can have jobs and provide for their families? Do we want to attack our dependence upon Mideast oil and the pollution of our planet? Do common people matter? Or do we want to mostly help the top 1 percent of our population become richer and richer and own more and more of our country by cutting their taxes so that we put their wealth ahead of the lives of the other 99 percent of our people?

Bedell is right on the mark.

Return the estate-tax debate to the real world of our budget choices of what we need as a nation, and how we should pay for it.

Posted by Mike Owen, Assistant Director

Medicare ‘Advantage’? Private carve-outs cost more

Private carve-outs such as Medicare Advantage drive up costs.

Bad policy should be bad politics.

Nevertheless, a group of members of Congress recently persisted in promoting a wasteful private-sector subsidy that undermines the highly successful Medicare program.

The Iowa Hospital Association, in a recent Twitter post, noted the letter from 58 House members against President Obama’s nomination of Dr. Donald Berwick to head the Center for Medicaid and Medicare Services. The letter claims that health reform could jeopardize so-called “Medicare Advantage” programs.

Public vs pvt insuranceWe can only hope.

As shown in the graph at right, public-sector health insurance provides better bang for the buck than private  insurance.

Moreover, specifically with regard to Medicare Advantage, substantial evidence and expert analysis has demonstrated the parasitic effects of such programs on traditional Medicare.

See an excellent primer that breaks down the problems with Medicare Advantage plans and why it is that these private carve-outs from Medicare drive up costs and make it more difficult to serve Americans who depend on Medicare.

Posted by Mike Owen, Assistant Director

Iowa jobs threatened by Congress’ inaction on Medicaid

A temporary increase in federal Medicaid payments created or saved 2,354 Iowa jobs in 2009, and will create or save 4,026 jobs in 2010.

But that job creation is threatened by the Senate’s failure to extend the increased in Federal Medical Assistance Percentage (FMAP) rates — the portion of Medicaid paid for by the federal government.

The American Recovery and Reinvestment Act of 2009 injected billions of dollars into Iowa’s economy, including $363 million to date in the increased FMAP rate. The Iowa Fiscal Partnership has illustrated the dramatic effects the Recovery Act has had on the state economy.

Just What the Doctor Ordered, An IFP analysis, described how the Recovery Act’s increased FMAP created and saved thousands of Iowa jobs:

Because Medicaid recipients save money on their health care bills, they are able to spend most of their incomes on meeting necessities through local payments for housing costs and through purchases from Iowa retail stores and service providers. In turn, these retailers and service providers are better able to keep their workers employed and have more income to spend purchasing from other businesses or residents in the state.

Without an extension of the increased FMAP, the state budget faces serious consequences, too. The Recovery Act’s increased FMAP rate is set to end at the close of this year — right in the middle of the state’s fiscal year.

As we have noted, in their Fiscal Year 2011 budget, Iowa lawmakers assumed that the increased FMAP would be extended through June 2011. Without an extension of the increased FMAP, there is a $120 million hole in the state budget. If Congress fails to extend the increased FMAP, Iowa’s lawmakers will be forced to cut spending in other critical state services to fill the Medicaid deficit or drastically cut Medicaid spending when the General Assembly reconvenes in January.

Iowa’s recovery from the recession has been slow, but it does appear to be ongoing. Failing to extend FMAP would undo much of the progress hat has been made, and hurt thousands of Iowa’s working families.

Posted by Andrew Cannon, Research Associate

EITC provisions in ARRA reward work, help economy

Our analysis of Census Bureau data show that more than 36,180 Iowa families could benefit from the EITC improvements made by ARRA in 2009.

Andrew Cannon, research associate
Andrew Cannon

By acting this summer to extend selected provisions of the American Recovery and Reinvestment Act (ARRA), Congress would preserve critical work supports for low- and moderate-income working families — and help the economy.

One of those provisions is the Earned Income Tax Credit (EITC), a bipartisan measure that keeps millions out of poverty, offsets payroll taxes and augments low wages, particularly for families with children.

The concept is simple: As low- and moderate-income adults work and increase their wages, they are eligible for a credit that rises, plateaus and then phases out as they reach closer to the range of middle-income earners. The credit is fully refundable, meaning that a family receives a check for the difference if their credit is larger than their income-tax liability.

In 2003, the EITC helped 4.4 million Americans escape poverty, including 2.4 million children. More children in the United States are lifted out of policy by the EITC than by any other social program.

Besides deterring poverty, the EITC encourages low-wage workers to work, because as their earnings rise at low wages, their EITC also grows.

ARRA — the federal recovery act passed in 2009 — offered the latest improvement to the EITC. ARRA created a new credit tier for families with three or more children. Families with two children can receive a maximum EITC of $5,028, while families with three or more children can receive a maximum EITC of $5,657 in 2009. ARRA further improved the EITC by expanding the amount of qualifying earnings for married couples filing their taxes jointly. The EITC will, without further action by Congress, revert to the pre-ARRA eligibility rules in 2011.

Thousands of Iowans claim the EITC each year. In 2006, the last year for which data is available, 177,329 Iowans claimed the EITC. The ARRA improvements will allow Iowans with three or more children to claim a slightly larger credit on their 2009 and 2010 tax returns. Married Iowans filing their taxes jointly will have a larger window in which to qualify for the maximum credit of $5,657.

Our analysis of Census Bureau data show that more than 36,180 Iowa families could benefit from the EITC improvements made by ARRA in 2009.

Extending ARRA improvements to the EITC would make those families better able to meet their household budgets, and because they can be expected to spend the money, those families could contribute more to their local economy.

Posted by Andrew Cannon, Research Associate

High stakes for Iowa in Congress’ decisions

Understanding these benefits and the consequences of losing them needs to be paramount in congressional decisions about temporary, targeted extensions of ARRA funding.

Andrew Cannon, research associate
Andrew Cannon

Today’s New York Times discusses a problem faced by 30 states — including Iowa.

State budgets have been put together assuming the extension of an increased reimbursement for Medicaid, a smart move for economic recovery and a necessary move to help states deal with the increased demands in a severe economic recession.

For Iowa, the loss of those dollars would cause a Medicaid deficit of almost $120 million, according to the nonpartisan Legislative Services Agency.

When building the state’s 2011 fiscal year budget this spring, Iowa lawmakers assumed the federal government would extend a temporary increase in its share of Medicaid financing. The American Recovery and Reinvestment Act of 2009 (ARRA) temporarily increased the Federal Medical Assistance Percentages (FMAP), the portion of Medicaid financed by the federal government. That increase, however, expires in December 2010, right in the middle of Iowa’s fiscal year. Iowa and many other states expected this financing to continue as these needs have not subsided.

So far, however, Congress has not acted. Without an extension, Iowa faces a shortfall that at some point will need to be addressed, with cuts in services that could come both in and outside the Medicaid program. Either way, a cut would be bad for the economy, which has benefited from the infusion of federal dollars. Pennsylvania Governor Edward Rendell, in fact, warns in the New York Times story today that in his state, the cuts “would  actually kill everything the stimulus has done.” His concern is warranted.

Besides shoring up state revenues, as Iowa Fiscal Partnership reports have shown, ARRA has brought significant economic benefits to Iowa to enhance the prospects of a faster recovery. For the Medicaid match alone, IFP reported in Just What the Doctor Ordered:

Every federal dollar of economic stimulus invested in Medicaid yields about $1.68 in total output for the state of Iowa. Out of that dollar, 76 cents is returned to Iowa workers in the form of wages and salaries and incomes of small business owners.

ARRA — by providing dollars for Medicaid, unemployment insurance and food assistance — has come through with important resources for vulnerable Iowa families at a time they are most needed. At the same time, it has boosted the economy by increasing or maintaining spending by Iowans on goods and services, keeping people employed and spending their money in the economy.

Understanding these benefits and the consequences of losing them needs to be paramount in congressional decisions moving forward on temporary, targeted extensions of ARRA funding.

Posted by Andrew Cannon, Research Associate

Flush with awareness

While water quality has fresh international attention brought by the enormity of the BP disaster, we also need to be looking at what we’re doing right at home, little by little and day by day.

Mike Owen
Mike Owen

Today’s Cedar Rapids Gazette editorial spotlights the work of four West Branch Middle School students in illustrating for their community the water-quality impacts of drug disposal.

In West Branch, a small town east of Iowa City, the team of Kara Fountain, Allison Kusick, Gabby Salemink and Megan Tadlock brought awareness to the effects of everyday actions on our environment, actions we take for granted maybe just because of tradition.

Then, when we realize the impacts, we have to find acceptance of that reality, find a way to break old habits and find the willingness to adopt new solutions. Much of public policy works that way.

A couple of reports from the Iowa Policy Project underline the issues examined by the West Branch students. One report, last December, notes that pharmaceuticals are one segment of a class of organic water contaminants that are found from everyday household use and tend to resist traditional wastewater treatment. A previous report, in 2006, noted that Iowa water is not tested for many chemical compounds that had not been considered as contaminants — among them prescription drugs for humans and animals, as well as cosmetics, dyes, preservatives and detergents.

In short, we need a better understanding of what’s going into our water supplies, and what is worthy of concern. While water quality has fresh international attention brought by the enormity of the BP disaster, we also need to be looking at what we’re doing right at home, little by little and day by day.

The West Branch students, under the supervision of retiring science teacher Hector Ibarra, are among those adding to knowledge about these issues for all of us. They worked with the University of Iowa Hygenics Laboratory to look for traces of discarded medicines in processed sewer water. As the West Branch Times noted, they also hosted a day for local residents to bring unused and old pharmaceuticals to be incinerated.

These students are an example for all Iowans, let alone leaders among students, in their willingness to explore and put what they’ve learned into practice.

Posted by Mike Owen, Assistant Director

Governor signs significant boost for Iowa families

Lily French
Lily French

Monday marked the enactment of possibly the largest investment for working families resulting from this year’s legislative session.

Governor Culver signed into law an expansion of the Food Assistance program that will reach 26,212 more Iowans who are struggling to buy enough food, either because they are unemployed, underemployed or simply have too low of wages even while working full-time to meet their day-to-day living expenses.

Not only will this program change help to secure almost $18 million worth of food for Iowans, it will provide a needed boost to local economies throughout the state. In the end, this piece of legislation will generate $33 million in economic activity over the next year and for years to come.  Now, we just have to let people know that new supports are available to help them!

Posted by Lily French, Outreach Coordinator