Iowa: Better sorry than safe

The Iowa DNR says you as a beachgoer have no need to know if toxins in the water might have reached a level that the U.S. EPA believes demands caution.

Iowa environmental officials are taking an unusual position for people charged with protecting the citizens of the state: “Better sorry than safe.”

No, that’s probably not the message you heard from Mom or Dad.

But it is the effect of the Iowa Department of Natural Resources (DNR) position not to follow tougher rules on water quality to guide warnings to beachgoers.

DNR has decided that if toxins in water reach a risk level suggested by the U.S. Environmental Protection Agency (EPA) as right for a warning, that is on a need-to-know basis, and you as a beachgoer have no need to know before you dive in, or before your child or dog splashes around, maybe drinks a little of the lake in the process.

Iowa is sticking with a more relaxed standard, of 20 micrograms of the microsystin toxin per liter, instead of the EPA-recommended 8 microgram level.

The Gazette story by Erin Jordan comes almost a year to the day since an Iowa Policy Project report by Carolyn Buckingham, Mary Skopec and myself showed how little the state is doing to address increasing problems with cyanobacteria, or blue-green algae, in Iowa waters. The report noted DNR testing had shown increasing numbers of beach advisories from 2009 through 2016, and increases in the number of lakes with advisories against swimming, due to microsystin levels — 17 of the 39 monitored beaches (graph below). And that was recorded under the weaker standard of 20 micrograms per liter.

Microsystin advisories for Iowa lakes, 2006-16Climate change and increased nutrient runoff contribute to increased algal blooms at the heart of the problem. If the number of advisories and lakes affected were to rise even more because of tougher standards, that likely would drive more Iowans to push for changes in policy to address the causes.

Safe might not be the top priority.

Sorry.

David Osterberg is lead environmental researcher and former executive director of the nonpartisan Iowa Policy Project, and professor emeritus of occupational and environmental health at the University of Iowa. dosterberg@iowapolicyproject.org

Better target senior tax breaks

Why should a senior retired couple pay less income tax than a working couple with similar or even less income? That can be the situation in Iowa, and many other states.

Also see Iowa Fiscal Partnership news release

A new paper about state tax breaks for seniors shows one reason pre-2020 chatter about new tax breaks in Iowa is a bad idea.

Elizabeth McNichol of the Center on Budget and Policy Priorities (CBPP) notes in her report Wednesday that special income-tax breaks for seniors cost states 7 percent on average in 2013, a figure that will rise with growth in the population over 65.

As McNichol notes, “The senior tax breaks are poorly targeted because of their design: most states provide them regardless of the recipient’s income or savings.”

Put another way: Why should a senior retired couple pay less income tax than a working couple with similar or even less income? That can be the situation in Iowa, and — as McNichol notes — in many other states as well.

It is a point Peter Fisher and Charles Bruner have made in Iowa Fiscal Partnership (IFP) analysis over the years about Iowa’s special breaks for pension income, and as legislators phased out what had already been a limited tax on Social Security income.

Already, Iowa has freshly passed, costly and inequitable tax cuts scheduled to be phased in over the next few years, yet state legislators just last week were talking about bigger cuts in 2020. Given attempts to expand senior breaks in 2018, but not adopted in the final package, there is a danger that new income-tax cuts in 2020 could include the new senior breaks.

Among changes considered in 2018 was an expansion of Iowa’s already generous pension exclusion from $6,000 (single) and $12,000 (couple) to $10,000 and $20,000, respectively.

McNichol’s paper notes Iowa is one of 28 states that already completely exempts Social Security income from tax, and one of 26 that exempts at least some pension income.

Iowa, in short, is already quite generous to retirees. Also as McNichol notes, for some this might make sense — seniors at low incomes. But not all.

“A large share of these costly breaks go to higher-income seniors who need them the least. States should reduce this expense by better targeting relief to seniors with low incomes,” she wrote.

Bruner and Fisher noted this problem in their IFP paper last year:

Iowa has adopted a number of special provisions benefiting seniors. While the elderly and disabled property tax credit is available only for those with low income, the other tax preferences are not based on ability to pay:

•   All Social Security benefits are exempt from tax.

•   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.

Iowa Fiscal Partnership analysis of tax policy and tax proposals is always grounded in fundamental principles of taxation, among them fairness: Similarly situated taxpayers should be treated similarly in tax policy.

What matters more to measure a taxpayer’s ability to pay is the amount of income, rather than its source. To tax income from wages at a higher rate than retirement income violates that principle.

Mike Owen is executive director of the nonpartisan Iowa Policy Project and director of the Iowa Fiscal Partnership, a joint effort of IPP and the nonpartisan Child and Family Policy Center in Des Moines. mikeowen@iowapolicyproject.org

Tax-cutters’ lack of confidence

Plans for election-year tax cuts expose tax-cutters’ lack of confidence that (1) cuts they already made will deliver prosperity, and (2) they will hold power beyond 2020.

In the confidence game of cutting taxes, where the world is promised to all but delivered mainly to the wealthy, Iowa’s tax-cutters are showing how little confidence they have in their own political talk.

State Senator Randy Feenstra of Hull is backing off his chairmanship of the Senate Ways and Means Committee as he runs for Congress in 2020, leaving the door open to Senator Jake Chapman of Adel.

Both have been big talkers painting the glories of tax cuts while running down Iowa’s competitive tax structure, and they have been successful using that political spin to make big changes — many of which are scheduled but yet to take effect.

Even then, they apparently will waste no time in rushing through new tax cuts, as evidenced by this story in the Cedar Rapids Gazette. There, Chapman is quoted that “he expected the Legislature would continue next session ‘to reform income taxes and reduce some of the highest tax rates in the country.’”

Before addressing the fundamental inaccuracy of the senator’s comment, one must wonder at least two things:

•   Are they not confident what they have passed already will not deliver what they promised?
•   Are they not confident they will retain political power through the Statehouse (the House is a much closer partisan split than the Senate) past the 2020 election?

Answering “yes” to either would explain their perceived need to rush more ill-advised tax policy into law.

In a very short span, Iowa lawmakers have eroded revenues with new tax giveaways to the wealthy and powerful, leaving scraps to working families in the middle and below. This has come with changes in personal income taxes, corporate income taxes and property taxes.

As Peter Fisher and Charles Bruner pointed out in an Iowa Fiscal Partnership analysis, the income-tax cuts passed in 2018 give almost half of the overall benefit to the highest-earning 2.5 percent of taxpayers — those making $250,000 or more.

Senator Chapman plays games with the term “tax rates” as if the highest tax rate is what anyone ever paid on all their income. It’s an illusion.

The highest rate — already reduced from 8.98 percent to 8.53 percent this year under the 2018 law — is a marginal rate; it is paid on only the highest share of income. The same taxpayer who pays the highest rate on one share of income also pays the lowest rate on the share of income where that rate applies.

In short, it’s a mix of rates — and they are applied to taxable income, which has many adjustments to lower that amount. Most notable among those is Iowa’s unusual provision to allow taxpayers to deduct federal income tax from state taxable income, which benefits higher-income people the most.

The tax-rate myth promoted by Senator Chapman is an old game, but the people who want to reduce public services and investments in the future keep playing it. And why not? They’re getting away with it.

The 2018 legislation includes ongoing rate cuts — if revenues reach high-enough levels. One reason to pass rate cuts again in 2020, before that deadline, is that you don’t expect the revenue targets to be met.

These changes have come at great cost to public services, including poor funding of public education from K-12 through community colleges and universities.

Looking ahead to the future of our state, and beyond the next election, would be the wisest course for Iowa tax policy. That is not what we’re getting.

Mike Owen is executive director of the nonpartisan Iowa Policy Project and director of the Iowa Fiscal Partnership, a joint effort of IPP and the nonpartisan Child and Family Policy Center in Des Moines. mikeowen@iowapolicyproject.org

Dumbing down definition of poverty

The CBPP report illustrates that the Trump plan would magically declare that some people below the current poverty line are no longer poor.

If you wanted to reduce the number of people defined as being in poverty, without reducing poverty itself, what might you do? You could always mess with the numbers.

The Center on Budget and Policy Priorities has a solid report out today showing how a Trump administration proposal would do just that. Authors Arloc Sherman and Paul van de Water examine the administration’s proposed alternative to the way cost-of-living adjustments are made to the official poverty guidelines.

The first problem, of course, is that the official poverty guidelines have almost nothing to do with the cost of living. They are an outdated formula — they are a half-century old while, not surprisingly, families’ spending needs have changed. We have shown this regularly at the Iowa Policy Project with our Cost of Living in Iowa research.

Here is what our report, by Peter Fisher and Natalie Veldhouse, noted last year:

Cost of Living Threshold Is More Accurate than Federal Poverty Guideline

Federal poverty guidelines are the basis for determining eligibility for public programs designed to support struggling workers. However, the federal guidelines do not take into account regional differences in basic living expenses and were developed using outdated spending patterns more than 50 years ago. The calculations that compose the federal poverty guidelines assume food is the largest expense, as it was in the 1960s, and that it consumes one-third of a family’s income. Today, however, the average family spends less than one-sixth of its budget on food. Omitted entirely from the guideline, child care is a far greater expense for families today…. Transportation and housing also consume a much larger portion of a family’s income than they did 50 years ago.

Considering the vast changes in consumer spending since the poverty guidelines were developed, it is no wonder that this yardstick underestimates what Iowans must earn to cover their basic needs. Figure 1 above shows that a family supporting income — the before-tax earnings needed to provide after-tax income equal to the basic-needs budget — is much higher than the official poverty guidelines. In fact, family supporting income even with public or employer provided health insurance ranges from 1.1 to 3.0 times the federal poverty guideline for the 10 family types discussed in this report. Most families actually require more than twice the income identified as the poverty level in order to meet what most would consider basic household needs. Even with public health insurance, the family supporting income exceeds twice the poverty level in all cases except the two-parent family with one worker.

Because the guidelines do matter in the computation of eligibility for work-support programs, it is essential that they are not eroded further to disadvantage low-income families. As the CBPP authors note, not only is the poverty line itself too low to reflect basic needs, but the annual cost-of-living adjustment, the Consumer Price Index for All Urban Consumers (CPI-U), also is flawed:

Prices have been rising faster than the CPI-U does for the broad categories of goods and services that dominate poorer households’ spending. The poorest fifth of households devote twice as large a share of spending to rent as the typical household, for example, and the cost of rent rose 31 percent from 2008 to 2018, compared to 17 percent for the overall CPI-U. In addition, recent studies find that low-income households may face more rapidly rising prices than high-income households even for the same types of goods, possibly because low-income households have fewer choices about where and how to shop.

The Trump plan would make that worse, substituting another cost-adjustment measure that slows the pace of upward adjustments in the poverty guidelines. The plan would magically declare that some people below the current poverty line are no longer poor.

Messing with the numbers is never an answer to identifying the challenges one might address with better public policy. Seriously analyzing the relevant ones is essential.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@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.

Mother’s Day topic: Fostering opportunity

Enjoy brunch on Mother’s Day, but have a good discussion at the table. There are ideas on the table in Washington about what is needed to help all mothers care for their families.

Mother’s Day is always a good time to focus on public policies that can make mothers’ important jobs easier.

Too often, policy makers look the other way as wages and work supports erode. Costs rise, debt mounts, children grow, and bills pile up. The challenges become daunting.

One proposal on the table would give mothers in low- and moderate-income families a break. The Working Families Tax Relief Act would help 23 million mothers across the country — and 211,000 in Iowa, 158,000 of them working — to look forward.

The proposal would strengthen both the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) — again, a benefit to millions nationally, kids in low- and middle-income families, according to estimates by the Center on Budget and Policy Priorities (CBPP). These benefits would be shared broadly across racial groups.

In Iowa alone, the plan would benefit 472,000 Iowa children, according to CBPP.

The proposal strikes a stark contrast to the 2017 tax law that targeted benefits heavily toward wealthy households and corporations — not working families. The principal so-called “middle class” tax cut in that bill was a very meager increase in the CTC, from $1 to $75, to 87,000 children in low-income working families in Iowa.

As CBPP’s Chuck Marr notes in this blog post, a single mother of two who makes $20,000 as a home health aide, for example, would see a boost in her CTC by $2,210 and her EITC by about $1,460 — a total gain of about $3,670.

Working parents at lower levels of income need to be able to afford basic necessities, home and car repairs or other costs of transportation and education or training to get better jobs. The EITC and CTC are critical supports that make work pay for families in low-income situations.

Mother’s Day is a good time to honor those values that we all share. So, go to brunch if you want, but don’t avoid this discussion at the table.

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

mikeowen@iowapolicyproject.org

Questions — before the answer comes

Whether it’s your job to sign or veto the property tax limitation bill hatched in back rooms of the Iowa Statehouse, or simply to evaluate it as a citizen watching the process (and ultimately paying the price for it), you should be able to answer these questions.

As Governor Kim Reynolds mulls SF634, the property tax limitation bill, there are many questions anyone would have to consider — questions that did not get an adequate hearing before the rush to passage of a backroom-built bill in the waning hours of the 2019 Iowa legislative session.

1)   Why an arbitrary 2 percent limit on new tax revenues? No matter what increasing costs an individual community may face to provide public services, the bill limits growth in revenues to 2 percent.

2)   Why penalize growth? No matter how much property valuation grows in good times, the revenue limits would restrict the public services needed to service a growing community.

3)   Why penalize recovery from disaster? Reduced property value under tax levy limits will reduce revenue for critical public services in recovery.

4)   Why take local tax decisions out of the hands of locally elected officials? It’s never easy for local officials to raise taxes — taxes they also pay — but the bill substitutes the arbitrary will of state legislators for the judgment of board and council members the voters choose to make local decisions.

5)   Why hinder jobs, encouraging local cuts in public service jobs by putting special levies for employee benefits such as pensions under the new, artificial and arbitrary general revenue cap?

6)   Why encourage a reduction of health benefits for local public service employees by putting those costs under an arbitrary revenue cap?

7)   Why should a “no” vote count twice as much as a “yes” vote? That is the effect of the two-thirds super majority required to go above legislative mandated 2 percent revenue growth. Local officials would have to reach that threshold in many cases with actually more than two-thirds approval: four “yes” votes on a five-member board or council, five if there are seven members — and that is the case even if revenues exceeding 2 percent growth would mean a decrease in tax rates!

8)   Why reward backroom deals in the name of transparency? There was no opportunity for a public debate on this deal hatched in the waning hours of the legislative session. There was no transparency in the process.

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

mikeowen@iowapolicyproject.org

 

Be sure to see this Iowa Fiscal Partnership backgrounder by Peter Fisher of the Iowa Policy Project for more information about the actual property tax trends in the state — trends ignored by proponents of the legislation who offered a false narrative about this issue.

Also see this blog by Peter Fisher.