Worker safety: Who gets protected?

Public policies should be assessed on whom they put at risk and whom they reward. The blanket business immunity in SF2338 during COVID-19 comes with a failed record of protecting Iowa workers.

The COVID-19 crisis poses a dizzying combination of health and economic risks, and it has forced us to rethink the ways in which our public policies protect us against those risks. The underlying logic of the CARES Act, for example, was based on the assumption that sharing public spaces — especially workplaces — posed a grave threat to the public health. Its benefits — including a limited program of paid leave and a relatively generous expansion of unemployment insurance — were designed to make not working and sheltering in place possible.

That instinct was right but its execution was dismally flawed. State unemployment systems could not begin to manage the avalanche of claims. The virus flourished in settings — most starkly meatpacking plants — that ploughed ahead as “essential” businesses. And states impatient to open up again did everything they could to discourage workers from accessing the new federal benefits — a point Iowa Workforce Development Director Beth Townsend all but conceded in testimony before Congress last week.

From the first hint of the virus to the rush to reopen, Iowa has done perilously little to protect its workers, their families, and their communities. Safe workplaces are pretty clearly defined in the guidelines developed by both the CDC and the Occupational Health and Safety Administration (OSHA). But there is nothing in state or federal law that compels employers to follow them, and ample evidence that many are not. Even in the midst of local outbreaks, county health directors lacked the authority to shut down production. “They just don’t get it,” as the Tama County emergency management coordinator, complained in the midst of an outbreak at the National Beef plant there, “They will keep going until all of their employees have this virus. They would rather risk their employees’ health and keep their production going.” As Governor Reynolds coldly reminded us in late May: “Our recovery is contingent on our ability to protect both the lives and the livelihoods of Iowans. We can’t prioritize one over the other.”

Those priorities came into sharper focus this week. In a brief and largely aimless session, the Iowa Legislature offered scarcely a passing reference to the health and economic insecurity facing Iowa’s working families. They did, however, jump to address the insecurity of Iowa employers — offering up blanket immunity from COVID related claims coming from workers or consumers.

The “COVID-19 Response and Back to Business Limited Liability Act” (Senate File 2338) requires that any claims of exposure to the virus meet a standard of “reckless disregard” or “actual malice.” Employers “shall not be held liable for civil damages for any injuries sustained from exposure or potential exposure to COVID-19 if the act or omission alleged to violate a duty of care was in substantial compliance or was consistent with any federal or state statute, regulation, order, or public health guidance related to COVID-19 that was applicable to the person or activity at issue at the time of the alleged exposure.” Since such regulations or guidelines are virtually non-existent, it is hard to imagine what such threshold might look like.

At a time of such peril and uncertainty, this is a remarkable and damning expression of our state’s priorities. It is a solution in search of a problem; there has been no stampede of frivolous damage claims — in Iowa or elsewhere. And it ignores the more obvious and equitable tack, which is to protect the workers in the first place, and allow them to refuse work (and draw unemployment benefits) if that protection is not sufficient. “Everybody wins when businesses follow clear, science-based guidelines to protect health and safety,” as The New York Times put it in a recent editorial. “Workers and customers are less likely to get exposed to the virus, and businesses are less likely to get exposed to litigation.”

Now, more than ever, our public policies should be assessed on whom they put at risk and whom they reward; on whom they protect, and whom they do not. The blanket immunity offered Iowa businesses by SF2338, alongside our abject and continuing failure to offer any meaningful protection for Iowa’s workers, fails that assessment on all counts.

Colin Gordon is senior research consultant for the Iowa Policy Project and a professor of history at the University of Iowa.

Faster infection pace, fewer limits

Despite problems with testing, we are able to know where there have been major increases in identified cases.

A number of Iowa counties are seeing a surge in coronavirus cases, even as the Governor continues to reopen the Iowa economy and further relax social distancing requirements.

In Wapello County, cases soared from 10 on April 28 to 306 two weeks later. Over that same time period, Crawford County saw an increase from 21 to 207, and Sioux County from 8 to 103. Yet instead of reinstituting social distancing in those hot spots, the Governor has expanded her relaxation of requirements on businesses from 77 counties to all counties statewide.

Given the problems and delays with testing, and the lack of widespread testing, it is difficult to know just how many Iowans are actually infected with the coronavirus, and whether there are other emerging hotspots that remain unidentified. But we do know where there have been major increases in identified cases. For the most recent two-week period, the table below shows the 16 counties with the highest number of new cases per 100,000 population over the past two weeks (through May 12).

When adjusted for population, we see that many rural counties are experiencing more rapid growth than urban centers, many of which (Linn, Johnson, Scott) did not even make this list. Half the counties on the list (indicated by shading) are among the 77 counties where restrictions were first relaxed on May 1.

Most of those eight counties we identified last week as likely hot spots based on the growth in cases up to that point. New additions to the list are Monroe and Osceola, where the total number of cases is not large, but where we may be seeing the beginning of a surge. Six of the eight shaded counties saw their case count more than double in the past week.

It is easiest to see which counties have grown the fastest if we compare the cases per 100,000 population and how this number changed since the county first hit 50 cases. The counties are compared on the basis of when the surge began in their county. Wapello and Crawford have been growing at much the same rate as Woodbury, notably one of the top counties in the entire country in terms of the size and rate of the coronavirus surge.

 

 

 

 

 

 

 

Peter Fisher is research director for the nonpartisan Iowa Policy Project in Iowa City.

Demanding a healthy way to go back to work

The state’s “back to work” directive sends the wrong public health message at exactly the wrong time. And in clear defiance of Iowa and federal standards, it puts economic and physical security of workers at unnecessary risk.

Iowans want to get back to work. But — much more importantly — they want to get back to work under conditions that protect their health and safety, and the health and safety of their families and communities.

Over the past few weeks, we have questioned both the metrics and the lack of transparency behind the state’s decision — virtually alone among its peers — to stop short of a “shelter in place” order. Those concerns are now magnified by announcement this week that Governor is lifting social distancing measures in 77 of Iowa’s 99 counties — this despite the fact that the caseload in Iowa continues to grow, that two of Iowa’s metros (Sioux City and Waterloo-Cedar Falls) are currently among the worst “hot spots” in the entire country, and that a sudden influx in social interactions, as the Iowa Medical Society warned earlier this week, “is all but certain to cause a spike in new COVID-19 patients and potentially overwhelm our health care system.”

Even more troubling is the clear evidence that public health policy is being driven by largely economic concerns. At the same moment as the Governor’s office announced the relaxation of restrictions, Iowa Workforce Development (IWD) chimed in with a chilling directive for unemployed Iowans — warning not only that “Iowans who refuse to return to work without good reason when recalled will lose eligibility to unemployment benefits,” but that those who continued to draw benefits in defiance of this directive faced “serious consequences for fraud, including fines, confinement and ineligibility for future unemployment benefits.” IWD even created a webform where employers are encouraged to “report employees who refuse to return to work without good reason or who quit their jobs.”

The IWD directive goes on to list a narrow range of “good cause” reasons for remaining unemployed — including a positive COVID test (for the worker or a member of her or his household), and the loss of child care or transportation to work because of COVID-19.

This directive — and the message it sends to working Iowans — is bad public health policy in a state where the most severe COVID outbreaks have occurred at workplaces. But, just as importantly, it offers a fundamentally flawed misreading of both Iowa law and the terms of the federal Families First and CARES Acts.

Iowa Code (871-Chapter 24.26 [96]) is crystal clear on this point, and offers a much broader set of conditions and options. A person who leaves a job due to “unsafe working conditions” or “intolerable or detrimental working conditions” cannot be considered to have voluntarily quit the position, which would make the worker ineligible for unemployment benefits. The determination of what is “unsafe” or “intolerable” depends upon both the workplace and the worker. A reasonable standard of safety, under these conditions, might be the guidance offered by the Centers for Disease Control or the Occupational Health and Safety Administration for best practices — regarding social distancing and protective equipment — for workplaces. Yet, while IWD is directed to discourage claims and applications, there is no accompanying expectation that such safety guidelines are mandatory in Iowa workplaces.

Federal law offers the same basic assurance. For workers collecting regular UI, the federal “prevailing conditions of work” provision prohibits a state from denying UI to a worker who refuses work if the “the wages, hours, or other conditions of the work offered are substantially less favorable to the individual than those prevailing for similar work in the locality.” This provision covers “work rules, including health and safety rules” and situations where there has been a change in the existing conditions of work. According to the legislative history of the provision, it “requires a liberal construction in order to carry out the Congressional intent and the public policy embodied therein,” and the “the claimant should be given the benefit of the doubt.”

In turn, IWD’s directive flies in the face of the federal programs (and money) designed to both prop up Iowa’s unemployment system through the crisis and offer a more generous approach to eligibility. The Families First Act (passed in mid-March) offered emergency grants to states (including Iowa) for the administration of unemployment under the condition that states streamline their application process and “demonstrate policies to increase access to unemployment compensation.” The Act also requires a report, due at this time next year, detailing how progress on increased access.

The CARES Act (passed in late March) established three new unemployment programs: Pandemic Unemployment Assistance (PUA) for those workers (self-employed, gig workers) not conventionally eligible for unemployment insurance; Pandemic Unemployment Compensation (PUC), which adds $600 per week (through the end of July) to all unemployment claims paid under either regular UI or the PUA; and Pandemic Emergency Unemployment Compensation (PEUC), a 13-week extension of state UI benefits.

The programs extended the logic of the Families First Act: States were expected to be expansive and generous in their approach to eligibility for unemployment insurance, making it both possible and economically-feasible for workers to shelter in place and avoid the risks posed in many settings by continued employment. Importantly, the CARES Act attached a list of COVID-related conditions (similar to that in the IWD directive) to the PUA program, but not to the expansion or extension of regular UI benefits.

The IWD’s “Back to Work” directive is bad public policy. On public health grounds, it sends exactly the wrong message at exactly the wrong time. And, in clear defiance of Iowa and federal standards for unemployment insurance eligibility, it puts the economic security and physical health of Iowa workers at dire and unnecessary risk. The Governor and Iowa Workforce Development should reverse course and protect our workers and their families.

Colin Gordon, senior research consultant for the Iowa Policy Project, is a professor of history at the University of Iowa.

Governor’s metrics still raise questions

Iowa’s social distancing policy appears to be hostage to an unexplained and backward-looking indicator for hospitalizations.

(UPDATED, APRIL 16)

The latest “metrics” from the Governor’s office once again raise serious questions. A few days ago it seemed clear that two or three of the state’s six regions would very soon reach the magic number 10, at which point shelter-in-place is considered justified by the Governor and the Iowa Department of Public Health, according to their guidelines. Instead, as of April 15, regions 1 and 6 remained stuck at 8 and 9, respectively, and region 5 had fallen to 8. Why? Because the hospitalization rate score, which by deduction must have been at 3 for all 6 regions just a week ago, was suddenly downgraded to 1 in two regions, and 2 in two others.

Today, April 16, things changed again. Lo and behold, Region 6 made it to 10. And in fact the Governor followed through with something akin to shelter in place, with most kinds of gatherings limited to families, not groups of 10 or fewer. No additional business closures were announced, however. Meanwhile, Region 5 jumped two points with new outbreaks at two more nursing homes, but then lost a point because the hospitalization score apparently was lowered again, without any explanation. So it remains at 9, even though it is maxed out on all criteria except hospitalizations.

No explanation of the hospitalization score has been forthcoming beyond the vague definition in the “Guidance” memo unearthed by Zachary Smith of the Iowa City Press-Citizen last week. That memo defines it thus: “Percent of identified cases requiring hospitalization.” Is the numerator the cumulative total of all cases in Iowa that required hospitalization at some point, or just cases in the last 14 days, or just current hospitalizations as of the most recent day? Is the numerator cumulative cases, cases in the last 14 days, or something else? We don’t know, and no hospitalization rate by this measure has been reported even statewide, nor does the newly launched dashboard contain any hospitalization data at the county or regional level.

Total cases of COVID-19 continue to rise, as do current hospitalizations. So in the face of a rising number of Iowans currently with a severe enough case of the virus to be hospitalized, why does the hospitalization score decline, lessening the supposed need for shelter in place? Why is the percent relevant in the first place? Surely the total number of persons hospitalized for the virus is the single most important indicator, since it signifies not only the number of Iowans seriously affected by the virus, but the potential strain on hospital resources.

A forecast of this number is the crucial indicator in the widely known forecasting models by epidemiologists at the University of Washington and elsewhere. But in Iowa, we still do not have a forecast, and social distancing policy appears now to be hostage to an unexplained and backward-looking indicator. If that percentage continues to be low, or to fall, despite daily increases in cases, deaths, and hospitalizations, we may not see another region get to the magic number of 10.

Peter Fisher is research director for the nonpartisan Iowa Policy Project in Iowa City.

pfisher@iowapolicyproject.org

Sheltering the data in place

One thing is clear: transparency has been sadly lacking, and for no apparent reason.

Governor Kim Reynolds over the past few weeks has moved incrementally to close more kinds of businesses, to the point where Iowa’s restrictions now resemble those of states that have a blanket statewide “shelter in place” order. Significant distinctions remain: a proper and comprehensive shelter in place order closes all businesses except those specified as essential, leaving no ambiguities and loopholes, and comes with clear and enforceable restrictions on travel and social activities.

The governor continues to assert that her recommendations are driven by the same four metrics that have guided her since the beginning and that only recently became partly public information due to efforts by the press. We provided a thorough analysis of that guidance several days ago. On Tuesday, we finally learned about one of those metrics: There are three long-term care facilities with a sufficient number of COVID-19 cases to be classified as a facility with an outbreak.

We now know enough to construct the point system in spite of stonewalling by the Governor’s Office.

The first of the four measures — percent of population age 65 or over — can be found from census data. The second — cases per 100,000 population — can be calculated because the number of cases has been released by IDPH by county. The third — outbreaks at care facilities — is now known, with locations, because of a question at a press conference.

That leaves the fourth — hospitalizations as a percent of cases — that is unknown by county or region because the governor still refuses to release the data. But we know the total score by region because it shows up on the maps that are intermittently released at press conferences (but remain unavailable on the IDPH website). Thus by subtraction we can determine that all four regions must be at the highest level, a 3, on the hospitalization rate score.

From here on out, the only thing that can change is the cases per 100,000 population and the number of care facility outbreaks. Region 5 is already at the maximum on the cases measure, and regions 1 and 6 will likely get there soon, leaving all three regions with a score of 9, 1 short of 10, the number that supposedly triggers shelter in place. So those regions, covering a large majority of the state’s population and COVID-19 cases, can get to 10 only with another outbreak at a care facility.

The governor on the one hand argues that we already have the equivalent of shelter in place, and at the same time the metric that she says still guides her decisions shows that shelter in place is not yet warranted anywhere in the state. Has that metric really been used thus far, and in what way? How do you get from the metrics to a list of particular additional businesses to close? What will happen when a region reaches 10? Will the governor order more stringent measures in just that region? Or will the whole thing be scrapped once a proper forecasting model is developed that meets with her approval?

One thing is clear: transparency has been sadly lacking, and for no apparent reason.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

Good start on Iowa unemployment insurance in health emergency

Actions by the state are welcome news. The four-week break in the legislative session is a good opportunity to look for other ways to strengthen the system to protect working families.

With widespread layoffs anticipated or already occurring in key sectors of the state’s economy, it is welcome news that the state has relaxed eligibility standards for receiving unemployment insurance benefits. In our IPP blogs of March 14 and March 15 we identified key changes that states could make fully in accord with U.S. Department of Labor guidance for increasing program flexibility to deal with the pandemic.

On Monday, Governor Kim Reynolds announced key changes by Iowa Workforce Development to the state’s UI system that align with these recommendations:

•    Work search requirements are waived for individuals filing an unemployment insurance claim as a result of COVID-19.

•    Individuals who have to leave their job because they are ill, because they are self-isolating due to exposure to COVID-19 or because they are caring for an ill family member, or because the business has shut down due to COVID-19 will be eligible for UI as long as they meet other standard requirements — having worked for six of the last 18 months and earned at least $2,500 during that period. Workers are expected to utilize sick days, paid leave, or telecommuting options if they are available.

•    Employers will not be charged for any employee receiving COVID-19 related unemployment benefits; i.e, their future insurance rates will not be raised.

Employees wanting to find more information on these provisions or to determine if their particular situation qualifies can find some answers on the Iowa Workforce Development website here.

The U.S. Department of Labor also reminded states that two other forms of flexibility may be helpful in the current situation: waiving the one-week waiting period before receiving benefits and establishing a Short Time Compensation (STC) program. Fortunately, Iowa does not have a waiting period, and already has an STC program called Voluntary Shared Work. The latter program allows the employer to reduce work hours for several employees instead of laying off a smaller number, with the employees then eligible for partial UI benefits to replace most of the wages lost due to reduced hours.

Voluntary Shared Work can be an important tool for employers and employees alike, allowing the business to keep trained workers and allowing more workers to retain their employment connection. In order to utilize the shared work provisions, an employer must apply. Employers who have not yet instituted work sharing should be encouraged to do so; they can find more information from Iowa Workforce Development here.

These actions by Iowa Workforce Development are welcome news. Federal emergency legislation just passed may provide additional flexibility to states.

The four-week break in the state legislative session is a good opportunity to look for other ways to strengthen the state system to protect working families who are affected in the current emergency. That will help the Iowa economy to come out stronger on the other side of the crisis.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

Tax plan harms most seniors

For seniors especially, new tax-cut promises are hollow — just like, if the Governor gets her way, the promises that came with the 2010 constitutional amendment.

iowacapitol-rotundaSeniors in particular should be wary of Governor Reynolds’ tax-shift plan because, like most Iowans they would, in general, see little or no benefit and could even be worse off.

The list of those harmed by this plan is significant already.

  • Poor and moderate-income Iowans will lose income and services.
  • Environmental and outdoor recreation advocates who sought a sales-tax increase to fund their priorities will get far less than they expected because the Governor proposes to change the rules.
  • Education, law enforcement and other services will suffer with net losses in general fund revenues that the governor is demanding.

Add seniors to the list. It is clear seniors are among the losers in this legislation unless they are (1) rich or (2) not concerned about the public services that will be lost.

Iowans at low and moderate incomes already can count on paying a greater share of their income in state and local tax under the plan. That’s because it trades a sales tax increase, which disproportionately affects those at lower incomes, for cuts in the income tax and property tax, which helps wealthier filers.

To get her way at the expense of low-income Iowans no matter their age, the Governor wants to change the law that set up the constitutional amendment approved by voters in 2010. The amendment directed the next three-eighths-cent sales tax to a Natural Resources and Outdoor Recreation Trust Fund. That law, set up to implement the fund, said trust fund moneys would “supplement and not replace” appropriations for the purposes named for the fund.

That is important on two counts. Besides throwing aside the expectation of all of the designated sales tax increase providing new money for those purposes, her plan shortchanges the specified purposes, cutting trails, REAP, and much of the funding for the Department of Natural Resources.

Beyond the formula change that should concern anyone who voted for the amendment in 2010, seniors in particular should be wary because the Governor is embracing the voters’ consent to a tax increase only if she can cut other taxes by a greater amount. Her proposed income tax cuts are guaranteed to hinder Iowa’s long-term commitments to other services, from education funding for grandchildren’s schools, to corrections to safety-net supports — and make the overall tax system less fair to the poor and middle-income Iowans and especially seniors.

A bad deal for seniors

The Governor’s plan would raise the sales tax by a full penny, not just three-eighths of a cent for the trust fund, and use the majority of the increased revenue to cut income taxes. That would be a bad deal for most seniors.

The Iowa Department of Revenue has estimated that an additional penny sales tax would cost the average lower income household in Iowa without children about $40 on average (with a range of $30 to $50). That includes all households making less than $30,000. Those in the $30,000 to $50,000 gross income range would pay $68 to $90 more.  Data from the Institute on Taxation and Economic Policy indicate that 40 percent of Iowa households earn under $50,000.[1]

But estimates from the Iowa Department of Revenue show that the income tax cuts would not provide any measurable benefit for the lowest-income 40 percent of seniors — an average tax savings of just one dollar, for those with taxable income under $10,000. Because of favorable tax treatment for seniors, many currently pay no income tax and thus would get no benefit.

Those earning $50,000 to $75,000 total income represent the middle 20 percent of Iowa households. They would pay $100 to $120 more a year in sales tax under the Reynolds plan, but save only about $33 in income taxes. At least 60 percent of seniors, in other words, pay more under this proposal — and they are paying more largely to finance bigger tax cuts for the wealthiest Iowans.

Seniors count on many public services that are funded by state and local government. So while seniors largely will not benefit on the revenue side, they will also lose on the expenditure side, in lost services. These services cannot avoid cuts if the Governor gets her way. Under her proposal, there will be about $175 million less revenue in the general fund each year, which means less funding for education, health care, and other services.

A key reason most seniors do not benefit

It also is helpful to remember that many seniors have several built-in exceptions to income tax. These exceptions make new income-tax cuts meaningless or minimal to them, unless they are quite well off already:

  • All Social Security benefits already are exempt from state tax in Iowa.
  • The first $6,000 in pension benefits per person ($12,000 per married couple) is exempt from tax.
  • Those age 65 or older receive an additional $20 personal credit.
  • While non-elderly taxpayers are exempt from tax on the first $9,000 of income, for those age 65 or older, the exemption rises to $24,000. For married couples, the threshold is $13,500 for the non-elderly, but $32,000 for seniors.

In short, under current Iowa tax law, seniors get very substantial income tax breaks.

For seniors especially, new tax-cut promises are hollow — just like, if the Governor gets her way, the promises that came with the 2010 campaign for a constitutional amendment for a sales tax increase to fund water quality and recreation.

 

[1]   Those with taxable income under $10,000 account for 41 percent of senior tax filers for Tax Year 2022, according to Table 5 in the Iowa Department of Revenue memo to Jeff Robinson on the impact of SSB3116 on seniors, Feb. 14, 2020. Those with $10,000 to $20,000 taxable income account for another 17 percent of senior taxpayers.

2010-PFw5464Peter Fisher is research director of the nonpartisan Iowa Policy Project.

 

osterberg_david_095115David Osterberg is IPP’s environmental researcher and co-founded the organization in 2001.

Cutting revenues, holding back schools

As the Senate goes low on school funding, the governor promotes a tax plan that would make improvements even more difficult.

It is worth noting that as the Iowa Senate passed an exceedingly meager 2.1 percent growth in per-pupil spending for Iowa’s K-12 public schools, Governor Reynolds’ tax bill offers a net reduction in revenue.

But even the governor has proposed more for FY2021 — 2.5 percent — than the Senate approved Monday. As shown below, the governor’s plan keeps Iowa on a long-term downward trendline (in red) for school funding growth. The Senate plan goes lower.

200115-SSA-shaded-roadmap6

 

The governor’s tax shift proposal trades a sales-tax increase for income-tax cuts: a bad deal both for tax fairness and adequate revenues. In doing so, she has chosen to pit education advocates against environmental advocates — who would see much less in funding for water quality and trails than voters directed in 2010 in a constitutional amendment. And, she would make our overall tax system tilted even more heavily to the wealthy than it is now.

Basic RGB

Poor and inequitable funding of public schools and other critical public services are directly related to an inequitable tax system that relieves those most able to pay — the wealthiest — of that responsibility.
The governor is demanding that the package of tax changes actually cause a net loss of revenue. This is not only a severe twisting of voters’ intent in 2010 in approving use of the next sales tax increase to raise funding for environmental and recreational enhancements, but a mathematical guarantee that other services will be held down or even cut.
If we are going to adequately fund programs to improve environmental quality and educational achievement, it starts with protecting all of those programs and promoting equity and fairness in how the revenues are raised.
M
Mike Owen is executive director of the nonpartisan Iowa Policy Project.
mikeowen@iowapolicyproject.org

Anti-taxers don’t get ‘competitiveness’

Iowa is a low-tax state for business, and has been for some time. Two leading business consulting firms have demonstrated this.

slide_taxfoundation-cropHere we go again. Whenever Iowa legislators or lobbyists want to cut taxes for business, or for high-income individuals, they trot out the same myth about competitiveness.

The reality is pretty simple: Iowa is a low-tax state for business, and has been for some time. Late last year, the Council on State Taxation released its latest report on how much businesses pay in state and local taxes, prepared by the accounting firm Ernst and Young. Iowa was 18th lowest — only 17 states had a lower overall tax rate on business.[1] (See graph.) Another accounting firm, Anderson Economic Group, ranks Iowa’s business taxes even lower, at 14th — only 13 states have lower taxes.[2]

But why use real data when you can just cite some anti-tax, anti-government think tank that has cobbled together a “competitiveness index” that makes Iowa look bad?

So it is again in 2020. The governor cited the need to be competitive in her condition of the state address, and the Senate president repeated the theme. To support the claim, Senator Charles Schneider pointed to a bogus study by the Tax Foundation that ranked Iowa 42nd among the states in “business tax climate.” Only eight states were worse.

The Tax Foundation, it turns out, mashes together 124 components of state tax systems to produce an overall “index number” to rank the states. Their index is meaningless; it gives weight to components that cannot plausibly affect tax competitiveness, while ignoring features that have a large impact on business taxes.[3]

The last problem is particularly salient for Iowa. Iowa offers single-factor apportionment, which can drastically reduce a corporation’s Iowa tax if they export much of their production. And Iowa is one of the few states that allow corporations to deduct part of their federal income taxes on their state return. Both of these factors are completely ignored by the Tax Foundation. Instead, they focus on things like the number of tax brackets. Meanwhile, the sales taxation of food is a good thing, in their book; Iowa’s failure to tax food somehow makes us less competitive. This is nonsense.

Iowa is a slow growing state, but more tax cuts for those at the top will not help. They will further erode the state’s ability to invest in our roads and bridges, in our children and our workforce, the building blocks of a strong economy. Education, from early childhood through college, not only produces the skilled workforce businesses need, but makes it easier to attract workers from elsewhere, knowing their children will get a good education.

[1] Business taxes as a percent of GSP. Ernst & Young LLP, Total state and local business taxes, October 2019. Table 4, page 12. https://www.cost.org/globalassets/cost/state-tax-resources-pdf-pages/cost-studies-articles-reports/1909-3269660_50-state-tax-2019-final.pdf

[2] Business taxes as a share of business pre-tax operating surplus. Anderson Economic Group LLC, June 2018. 2018 State Business Tax Burden Rankings, Exhibit I, page 17. https://www.andersoneconomicgroup.com/wp-content/uploads/AEGBusinessTaxBurdenStudy_2018_FINAL.pdf

[3] For a more detailed critique of the Tax Foundation’s ranking, and others, see “Grading the States: Business Climate Rankings and the Real Path to Prosperity.” http://www.gradingstates.org/

2010-PFw5464Peter Fisher, research director of the nonpartisan Iowa Policy Project in Iowa City, is professor emeritus in the University of Iowa School of Urban and Regional Planning. His widely cited Grading the States analysis is at gradingstates.org. pfisher@iowapolicyproject.org

Transparent realities of bad law

To be transparent, lawmakers and the governor would admit they are enshrining minority rule, punishing public workers again, and penalizing economic growth and recovery.

curtains-tighterIn the closing nights of the 2019 session, while most Iowans slept, the Iowa Legislature enacted substantial changes to the way city and county governments fund public services.

There was no chance for public input, or for analysis by legislative staff. With no apparent sense of irony, the bill’s supporters argued the purpose was to increase transparency for voters.

On Thursday, Governor Reynolds signed the bill out of the public eye, issuing only a one-sentence statement repeating the same claims and ignoring the real impacts.

In this one bill, the Legislature managed to enshrine minority rule, punish public-sector workers (yet again), penalize economic growth, and hamstring cities and counties recovering from a natural disaster.

The bill will limit the growth of property taxes levied by cities and counties to 2 percent each year. Local elected officials will need a two-thirds vote to do more, if they find that their constituents’ needs demand it. So much for majority rule and local democracy.

The bill threatens city services and the local public workers who provide them. Employee benefits, such as health insurance and contributions to pension funds, until now could be financed by a special tax rate, in recognition that the rising cost of health insurance and fixed pension contributions are outside city or county control. These costs have been increasing more than 2 percent annually, often much more. But now they go under that arbitrary 2 percent cap.

There was much attention — deservedly so — to how various versions of the bill would affect IPERS pension benefits. This ultimately served to distract many from much broader impacts.

When pension contributions and health insurance premiums increase more than 2 percent, the city or county may have to reduce services, cut benefits, or lay off workers to keep overall tax growth under the cap. The bill pits taxpayers against the people who plow their streets, protect their homes, build roads, or maintain parks and libraries.

When services are cut, public employees can be portrayed as the scapegoats, which will be convenient to the forces that have threatened public employee pensions. Turning Iowa’s secure pension programs over to less-secure, privately run for-profit administrators remains a goal for those forces.

The new bill also penalizes local governments for pursuing growth. A last-minute change in the legislation puts revenue from new construction under the 2 percent cap.

As a result, cities and counties experiencing significant growth may be forced to cut rates year after year and will find themselves without the revenue to support the growth if they can’t muster the supermajority. For example, a city growing at 4 percent per year would face a revenue penalty of 17 percent within five years.

Another last-minute change left in place existing levy limits, which would have been abolished under both earlier bills. So now cities and counties face two limits, one on rates and another on revenue growth.

The combination could be devastating in some circumstances. Consider a flood, or a recession causing a loss of property value. The rate cap forces revenues to decline for any city or county at or near the rate limit, which includes the vast majority of localities.

Then, as the recession ends or the city rebuilds, the revenue cap could now undermine recovery. The reduced revenue becomes the new starting point, potentially leaving a city or county unable to restore revenues even to the previous level because of the 2 percent limit on revenue increases. And this just at a time when extraordinary measures are needed to help the recovery.

One has to wonder if more transparency in the process might have helped legislators find a better outcome — or at least helped their constituents to argue for one.

Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City. Contact: pfisher@iowapolicyproject.org

Editor’s Note: This post updates and expands upon a previous post about this legislation, prior to the governor’s signing of the bill.