Perspective for the common good on Tax Day

On Tax Day — and every day — we must ask whether rampant tax breaks, subsidies and tax cuts are wise choices with public dollars from taxpayers.

It is so tempting, as we are seeing on social media over the last several days, to talk about filing your taxes and the fact that you (1) paid more or (2) paid less.

Is that really what matters? Let’s take a step back and look at the big picture — the common good. There are three main points to remember:

1) First, what are taxes for? Schools. Roads. National defense. Health care. Fairness and protection in the workplace. Clean air. Clean water. Recreational opportunities. Libraries. There are more examples you may put out front.

But in any case, none of those services funded now by taxpayers will be provided without taxes. They will not be provided by the private sector, at least on any scale that provides access to all Americans.

Go ahead. Chart a road to opportunity for all that does not include taxes. You cannot do it. It is integral to the mission, which is why tax reform is an essential stop we identify on our Roadmap for Opportunity. Unfortunately, Iowans have not received tax reform, but a doubling down on bad tax policy trends of the last 20 or 30 years.

2) Our Iowa tax code is inequitable. The rich pay less as a share of their income than people who live paycheck to paycheck.

It was already a long-term trend in Iowa (and in many states) and it was worsened by the 2018 tax overhaul. Our state and local tax system is upside down.

3) Cleaning up and restoring balance to our tax code would better assure public money is going to public purposes, rather than subsidizing tax breaks and loopholes for those most politically well-connected.

As we have shown:
•     Tax credits for business already cost more than $300 million a year.
•     Tax loopholes for multistate and multinational corporations already cost between $60 million and $100 million.

On Tax Day — and every day — we must ask whether those choices are the best use of public money, when we know education, public safety and environmental quality are being compromised by short-sighted budget decisions in Des Moines.

Mike Owen is executive director of the nonpartisan Iowa Policy Project.

mikeowen@iowapolicyproject.org

Building blocks of inequity

it is not a Davenport issue, but an Iowa issue, and a failure of public policy.

Iowa’s school funding process is broken.

Consider:

  • The Legislature repeatedly violates the law by failing to set state aid in time for districts to adequately plan their budgets.
  • The levels of funding lawmakers set — averaging less than 2 percent growth over the last six years — are routinely below the growth in costs that schools face.

As if those two things are not bad enough, inequities grandfathered into the school funding formula have not been corrected. While the four-decades-old formula was designed to reduce inequities between districts of higher and lower property values by augmenting property tax revenues with state aid, a gap persists.

Long and short: There is a $175 range in the “cost per pupil” that school districts must use as the building block of their annual budgets. While the minimum cost for this year is set at $6,446 per student, six districts are as high as $6,621.

The inequities have been known for some time. When combined with chronic underfunding, these inequities are magnified. In one case, Davenport school officials are defying state limits on use of their own resources to make sure their students have the same opportunity as students in other districts.

For example, as school budgets are based on enrollment, a district with 1,000 students and operating at the minimum — the state cost per pupil — is losing out on $175,000 per year in comparison with a district at the maximum. In a district the size of Davenport, that’s about $2.8 million a year.

What many Iowans might not realize is that their own school district may be in a similar situation to that of Davenport.

Few districts (only six) are at the maximum per pupil cost; most districts (84 percent) are $100 or more below the maximum per pupil cost. Nearly half of all districts (164 of 336) are at the minimum.*

Basic RGB

The more you look at this, you can see it is not a Davenport issue, but an Iowa issue, and a failure of public policy.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 

*Iowa Department of Management, www.dom.state.ia.us/local/schools/files/FY16/DistrictCostPerPupilAmountsAllFY2016.xls

Why the tuition freeze matters

A bright spot in the just completed session of the Iowa Legislature is that lawmakers for the second year in a row have assured a tuition freeze at Iowa, Iowa State and Northern Iowa.

A bright spot in the just completed session of the Iowa Legislature is that lawmakers for the second year in a row have assured a tuition freeze at Iowa’s Regents universities.

The 4 percent increase in state funding for FY2015 is an important investment. It means current students will be able to keep a little more money in their pockets, and prospective students will have greater access to higher education at the University of Iowa, Iowa State University or the University of Northern Iowa.

For now, the state has stalled its trend toward sharp tuition increases — a trend similar to what’s happened at public colleges and universities across the country. A new report from the Center on Policy and Budget Priorities found that from FY2008-FY14 state funding per student at Iowa’s Regent universities decreased by 23.8 percent, leading to a 12.2 percent change in average tuition after adjusting for inflation — $854 more a year per student.

It’s a simple equation: When state funding goes down, tuition goes up and/or resources to help students are reduced. Iowa Fiscal Partnership research has shown these trends in our state, as noted in the graph below covering tuition vs. state support of Regents institutions from 2001-13.

tuitionvsstateaid

These trends shift the cost of education from the state to the students and their families. The result is that students take on more debt or have fewer choices among institutions, if they choose to attend at all. At low incomes, some students may simply choose not to enroll even though education might be what they want, and necessary to their career goals.

Excessive student loan debt has broad economic implications. It is associated with lower rates of homeownership among young adults, it can create enough stress to decrease the probability of graduation and reduce the chance that graduates with majors in science, technology, engineering and mathematics will go on to graduate school.

The economic importance of higher education will continue to grow, as getting a college degree is increasingly a prerequisite to enter the middle class. And beyond those who receive the degree, everyone in the community benefits when more residents have college degrees. An area with a highly educated workforce attracts better employers who pay better wages and this can boost an area’s economic success.

Strong state revenues offer a time to reinvest in higher education, and to return funding of services to pre-recession levels.

IPP-gibney5464  Posted by Heather Gibney, Research Associate

Sound budgeting doesn’t include blanket tax credit

Budget balance can mix responsible tax reform with smart investments. A $750 tax credit for all is neither.

Mike Owen
Mike Owen

This session of the Iowa Legislature offers a tremendous opportunity to move the state forward with a balanced approach — including responsible, fair tax reform and investments in critical needs that have gone unmet, in education at all levels, in environmental quality and public safety.

The proposal for a blanket $750 tax credit to couples, regardless of need and blind to the opportunity cost of even more lost investments, does not fit that approach. To compound a penchant to spend money on tax breaks is fiscally irresponsible to the needs of Iowa taxpayers, who will benefit from better services, and to the promise that we would return to proper investments when the economy turned up, as it has. Furthermore, to give away Iowa’s surplus when uncertainty remains about the impact of federal budget decisions on our state’s tax system and services is tremendously short-sighted.

As the Iowa Fiscal Partnership has established, cutbacks in higher education funding have caused costs and debt to rise for students and their families, not only at the Regents institutions but community colleges as well. While Iowa voters, through a statewide referendum, have expressly called for new revenues to go toward better environmental stewardship, lawmakers have not taken action. The surplus we now see should be used responsibly for the future of Iowans, who patiently endured budget austerity for the day when we could once again see support for critical services. This is no time to be forgetting our responsibilities.

Iowa can do better by returning to the basics of good budgeting, crafting budget and tax choices that keep a long-term focus on the needs of young and future generations, whose lives will be shaped by the foundations we leave them.

Posted by Mike Owen, Assistant Director

Connecting dots draws tough course for Iowa jobs

Why is job outlook dim? Don’t blame an educational gap or the business cycle. Long-term projections favor low-wage service jobs over better-paying sectors.

The chart projecting Iowa jobs in the near future is not pretty.

click on image for interactive version

Using the most current state level numbers, for 2008-2018), this graph shows that the fastest growing jobs taking larger shares of the Iowa job market through 2018 are in sectors that pay lower than the state median wage. Dots represent occupations; blue dots pay higher than the statewide median wage (2011 numbers) and red dots pay lower. Move your cursor to each dot to see the occupation, its 2008 employment, its median wage and projected employment.

Only 4 of 18 occupations projecting job gains over 1,500 by 2018 pay better than a median wage, and only one of the 10 occupations projecting job gains over 2,000 pay better than the median. Six occupations (retail sales, office clerk, nursing aides, home health aides, food preparation, and customer service) project job growth greater than 4,000 and the highest wage in this group falls more than $2.00 short of the median wage.

Why is this happening? Don’t blame it on an educational gap, in which workers with skills pull away from the rest. As the Center for Economic and Policy Research has shown — here and here and here — today’s low wage workers are older and better educated  than ever.

It also is not an artifact of the business cycle, as the Department of Labor estimates in long-term projections that about a third of new jobs through the next decade will be in low-wage service occupations (retail, home health care, child care, janitorial).

Combine these projections with the troubling trend of the last business cycle, which hit good jobs hard. The National Employment Law Project has shown (here and updated here), that job losses during the recession were concentrated in mid-wage occupations, while job gains during the recovery have been concentrated at the low end.

Our work, it seems, is cut out for us — well-paid or not.

Posted by Colin Gordon, Senior Research Consultant

Note: Colin Gordon is a Professor of History at the University of Iowa and Senior Research Consultant at the Iowa Policy Project. This post is taken from his blog, TelltaleChart.org

Small boost in funding masks long-term reductions in state services

Small increases in some budgets should not distract from big cuts in higher education and water quality over time. There is more work to do.

David Osterberg
David Osterberg

July 1 begins the new fiscal year for the state of Iowa so this is a good time for IPP staffers to update reports released during the legislative session.

Two areas of funding that generally get lip service support from our elected officials are higher education funding and funding for water quality programs. In both areas there was some increase over the very low levels of funding from the previous year. Yet the long-term erosion of funding in these areas of state services was not improved a great deal.

While funding for ISU, UNI and the University of Iowa was increased this year by about $20 million, funding for these institutions still remains about 40 percent below what it was in fiscal year 2000 when inflation is taken into account. Andrew Cannon’s earlier report showed that long term underfunding is the reason that tuition has increased so much over the last decade. Community colleges seem to have fared better with only a 15 percent reduction in funding in real terms over the same period but enrollment has increased, so actual support for students is lower than that.

Water quality received some funding increases in two of the eight individual programs reviewed by Will Hoyer in his March 2012 report. However, overall funding for this group of water quality programs has fallen from what it was 10 years ago.

Lower funding in areas Iowans strongly support are the consequence of continual tax cuts that reduce the size of the state budget in relation to the size of the Iowa economy.

Posted by David Osterberg, Executive Director

Tax-cutters’ unbalanced focus undermines self-government

What we have in Des Moines is a leadership problem and a governing problem.

David Osterberg
David Osterberg

Cut taxes, starve schools. Cut taxes, starve environmental protection. Cut taxes, … well, I think you’re getting the idea.

“The-tax-cuts-are-my-only-priority” legislators now have enough power to keep eroding our ability to meet our needs.

As I pointed out Sunday in a guest opinion in The Gazette in Cedar Rapids, this drive to underfund education is the root of recent decisions to close Polk Elementary School in Cedar Rapids and the Price Lab School at the University of Northern Iowa.

What we have in Des Moines is a leadership problem and a governing problem. Leaders find a way of matching revenues to our needs. The rejection of this kind of responsibility by a large enough number of our elected officials is the problem.

And the facts — as we have demonstrated in Iowa Policy Project reports — are clear. Most recently, we showed Iowa’s decline in support for the regents’ universities over the last 10 years. For the University of Iowa alone, it meant 40 percent less in actual spending power than the state provided in 2000, and a shift of costs to tuition-paying students and their parents.

A week before, we showed similar results with water-quality funding.

Even now, there is no greater cry than to cut commercial property taxes — even when most of the cuts would go to firms like WalMart and McDonald’s. It doesn’t matter. It’s a tax cut, period.

Ironically, even those who some elected officials are attempting to appeal to need the services they are cutting. Rockwell Collins needs trained engineers, and can better retain employees when rivers are clean and people have places to recreate.

Voters who want their kids educated and their rivers clean need to recognize that it doesn’t happen without state funding. More tax cuts don’t get us there.

Posted by David Osterberg, Executive Director