Look west, or to locals, for leadership

Iowans could take a lesson from leaders in Oregon, who had the courage to look at their residents’ economic challenges. Just repealing local minimums does not meet that test of leadership.

Those concerned about a “patchwork” or “hodgepodge” of minimum wage laws across Iowa might want to take a look west — far west — to Oregon.

In contrast to Iowa legislators’ calls for “uniformity” no matter how inadequate a uniform minimum wage may be, the Beaver State has embraced the idea of different minimum wages.

A 2016 law effectively sets three tiers of minimum wages — one for the Portland area (Metro), one for selected other urban areas (Standard), and one for more rural counties (Nonurban). Currently, the minimums are $9.50 in Nonurban areas, and $9.75 in the Standard and Metro areas. As of July 1, they will be $10, $10.25 and $11.25, respectively.

As the Oregon law moves forward, the three tiers will rise in steps each July 1, ultimately to between $12.50 and $14.75 by 2022. A formula will index those rates starting in 2023.

Quite a contrast from Iowa, where we still sit at $7.25 as a statewide minimum, with five counties (Lee County the latest, on Tuesday) choosing to set a higher minimum for their workers. State officials who have balked at raising Iowa’s statewide minimum have retaliated with legislation to repeal the raises and prohibit future such actions, the bill as of Wednesday morning still awaiting the Governor’s almost certain signature.

Oregon’s hybrid approach of a state policy setting a small range of local minimums may or may not be optimal, but it does recognize the value of a meaningful state minimum reaching to all corners of the state, and the fact that not all labor markets are the same — they differ by locality.

In Iowa, the local option exercised thus far by five counties under their home-rule authority is a middle ground that permits careful judgment when state edicts prevent it.

But Iowans could take a lesson from leaders in Oregon, who had the courage to look at the economic challenges faced by their residents, and to address those challenges in meaningful public policy. Just repealing local minimums does not meet that test of leadership.

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

mikeowen@iowapolicyproject.org

Who will attend the signing ceremony?

billsigning-pensYou pass a bill, presumably you’re proud of it, and would like a picture with the Governor signing it. And you even might get a pen.

There are usually plenty of pens.

The Iowa House and Senate have now both passed a bill removing authority of local governments in Iowa to pass minimum wage increases above the state’s meager $7.25. Four counties have done so, and these ordinances will be repealed.

Who wants their picture with the Governor authorizing a pay cut for some 85,000 Iowans? The Governor, who set a campaign goal in 2010 of a 25 percent increase in family incomes (see his website), might think twice about attending himself.

In any event, we can’t make it.

And neither can anyone at $7.25.

owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

Curtains for tax reform

If there’s anything we need less of this legislative session, it is back-room dealing where major changes in public policy are hatched.

If there’s anything we need less of this legislative session, it is back-room dealing where major changes in public policy are hatched, then rammed through the Legislature without sufficient public vetting.

Senate Majority Leader Bill Dix is quoted in media that a tax plan is coming in the next two weeks. It’s staying under wraps until then — a terrible disservice to the responsible setting of public policy. Senator Dix should pull back the curtains, right now.

But, since the senator is not going to let the rest of us in on his big secret tax plan, we should all go into this recognizing at least two major points at the start:

(1) Iowa taxes are in the middle of the pack or below average by any responsible measure, something the business lobby and far-right ideologues never want to acknowledge; and

(2) any discussion of tax changes should take a comprehensive approach that should be grounded in widely accepted principles of taxation.

Point 2 is something that is always a problem in Iowa. The typical approach is to target one tax, cut it, and move on to the next one. Meanwhile, the impact on the overall adequacy and fairness of the tax structure (two of the important tax principles), and on the critical public service that the tax system supports, is left to a “let the chips fall” mentality.

Take the curtains away, Senator Dix. It’s the business of all Iowans, right now. A late-session rush job to make a major overhaul of Iowa taxes is not only wrong from a civics-textbook standpoint, but it is bound to create problems that its authors cannot predict.

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

mikeowen@iowapolicyproject.org

A spotlight, not a floodlight, on business breaks

Iowa’s business tax credits will have grown by half from 2011 to 2021 under current official projections. That is where the spotlight needs to be.

A bill in the Iowa House, HSB187, would cut a range of Iowa tax credits, eliminating refundability and capping overall spending on credits. There is significant opposition, because people like their tax breaks. But the issue is suddenly in the spotlight because these and other giveaways are responsible for Iowa’s serious revenue challenge.

There are solutions to the state’s rampant and often unaccountable spending on tax credits and other tax breaks. It is interesting that an interim committee that meets every year to examine a rotating set of tax credits has not produced any reforms. It’s not because reforms are not necessary. Rather, it’s a lack of resolve.

One of several strong recommendations in January 2010 by a Special Tax Credit Review Panel appointed by then-Gov. Culver in the wake of the film credit scandal was for a five-year sunset on all tax credits. This would require the Legislature to re-approve every tax credit.

That would be a start. Another option: Instead of eliminating refundability for all credits, which affects even credits where refundability makes sense (Earned Income Tax Credit), limit it where it does not. The Special Tax Credit Review Panel recommended eliminating refundability for big recipients of the Research Activities Credit (companies with gross receipts over $20 million). Another option would be to cap refundability for all credits at $250,000, which would not harm small players, either businesses or individuals, and would reduce the excessive checks to big businesses.

The scrutiny and demand for a return on investment on these credits would be too much for many of these special arrangements to withstand. Eliminating or capping wasteful credits would free up revenues for other priorities; some would invest more here or there — education, or public safety, or the environment — and some would simply use it to reduce overall spending. But either way, we would have the opportunity for a debate.

There is a danger in putting everything on the table at once. It presents a false equivalency of tax credits — that they are somehow all the same. It ignores the fact that some are for private gain and some for the common good, and some are a mixture. Some work, and some do not.

Some meet the purpose for which they were advertised (the Earned Income Tax Credit, for example, which benefits low-income working families), and some miss the mark with tens of millions of dollars every year (the Research Activities Credit, where most of the money goes to huge, profitable corporations that pay little or no income tax instead of to small start-ups as envisioned).

Iowa’s business tax credits will have risen by half from 2011 to 2021 under current official projections. That is where the spotlight needs to be.

Challenging all credits at the same time gets everyone’s backs up. That is a recipe to assure continued unwillingness to take on any of it. And that will not serve Iowa very well.

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

mikeowen@iowapolicyproject.org

IPP Statement: IPERS is strong

Governor Branstad and Lieutenant Governor Reynolds are discussing a potential task force to examine whether to replace the IPERS defined benefit pension plan with a defined contribution plan, like 401(k) plans.

The Iowa Policy Project, which has researched this issue already, today released this statement:

The governor’s proposed task force on public pensions is unnecessary. The evidence is clear that a defined contribution plan is inferior to a defined benefit plan in the fundamental purpose of a pension: to assure a secure retirement for an employee. The IPERS law also clearly states its purpose of reducing turnover and attracting high-quality public workers.

Therefore, any task force should be charged with those two fundamental tasks: (1) assuring a secure retirement for public employees, and (2) enhancing the ability of the state to attract and maintain good workers. Public employment should not be reduced to temp work.

It is noteworthy that the assurances offered current employees — which include the Governor, Lieutenant Governor and state legislators — pit current employees against future employees. It would replace a secure retirement with one at the mercy of the ups and downs of the stock market.

IPERS is strong — stronger than most such systems and stronger than it was after ill-advised underfunding and a recession. As long as legislators do not take the easy way out and choose to underfund this fundamental responsibility again, there is no reason to consider a change. A fair task force will discover this.

The effort to change this stable and secure pension plan for public employees is driven by political arguments — not economic or fiscal arguments. To better understand the issues and the political spin that is clouding them, see also these newspaper guest opinion pieces:

Alarmist rhetoric sells Iowa pension plan short,” by David Osterberg in the Cedar Rapids Gazette, December 2013

Strengthen, don’t break, Iowa pension plans,” by Peter Fisher in the Iowa City Press-Citizen, March 2014

 

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

Contact: mikeowen@iowapolicyproject.org

Ten years and counting: Iowa’s inaction on the minimum wage

170118_capitol_170603-4x4It was the first bill Chet Culver signed into law as Governor of Iowa: an increase in the minimum wage, from $5.15 to $7.25 in two steps, to be fully in force Jan. 1, 2008.

“This is a historic occasion,” Culver said, Todd Dorman reported in the Waterloo Courier.

A historic occasion, and falling fast into history. Wednesday, Jan. 25, 2017, marks the 10th anniversary of that day. Low-wage workers have waited for an increase, through five state legislative campaigns and two gubernatorial elections.

They’ve heard promises and spin, facts and nonsense, and it all comes out the same: Iowa’s official policy is that businesses can get away with paying hard-working people, sometimes in unpleasant working circumstances, a measly $7.25 an  hour.

And the facts remain the same: Hundreds of thousands of Iowa workers would benefit from a minimum wage increase — over 300,000 from an increase to $10.10, over 400,000 from an increase to $12 — and there is no guarantee that they will even see a vote this year.

Perhaps the only reason they might is that four counties had the courage to take on the issue. The wage is now $10.10 in Johnson County, with Linn, Wapello and Polk counties following Johnson by approving increases that when implemented will set minimums from $10.10 to $10.75.

That is, if the Legislature permits them to stand. Governor Terry Branstad and the business lobby want a uniform wage — with no real indication whether that means an increase — and this could result in repeal of the local increases.

Understand: We do not have a monolithic statewide labor market. It makes perfect sense for local officials to respond as best suits their communities. And it is nonsense that seeing different requirements in different counties is a problem for businesses — other than the fact that they might not want to pay more.

Someday, we may see a statewide minimum wage set at a meaningful level, and indexed to inflation. There is no guarantee from this Legislature or this Governor — in fact, history shows it is unlikely.

So, as we mark the 10th anniversary of the signing of our piddling minimum wage, one that leaves Iowa behind 29 states and a growing number of cities and counties around the nation, we might want to consider how long we want Culver’s action in 2007 to be the historic one.

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

Contact: mikeowen@iowapolicyproject.org

Welcome silence on tax cuts; too much silence elsewhere

It is reassuring that the Governor chose not to grab the tax-cut mantle so strongly.

Against a backdrop of calls for new tax cuts, Governor Branstad in his silence sounded a note of caution.

In fact, the Governor’s apparently final Condition of the State message was notable for several issues that he chose not to address or promote.

Iowans who are vulnerable economically are looking for answers, yet there was no discussion of an increase in the minimum wage, now stagnant for nine years at $7.25, or of protecting local minimums above it.

The Governor offered no guidance for the Legislature and the public for what could happen with health coverage if Congress repeals the Affordable Care Act or imposes new restrictions on Medicaid. These issues could quickly become the most pressing in our state as the Governor prepares to leave office for his ambassadorship to China.

At the same time he encouraged Iowans “to ask the tough questions that challenge the status quo” about services and state commissions, he declined to make the same charge regarding Iowa spending on tax breaks — even though General Fund tax credits have more than doubled in just 10 years, with reforms long past due.

At the same time he set a goal for 70 percent of the workforce to have post-high school education or training by 2025, he was promoting $34 million in cuts in higher education from the current year budget.

At the same time he promoted a House-passed plan to divert General Fund revenues to fund water-quality efforts, he again rejected a long-term, dedicated and growing source of revenue — a three-eighths-cent sales tax as authorized by voters in 2010 — that would not compete with existing needs.
There will be much for Iowans to review in the budget proposals as they make their way through the legislative process, along with issues including public-sector collective bargaining and other big issues affecting working families in the coming weeks and months.

It is reassuring that the Governor chose not to grab the tax-cut mantle so strongly on his way out the door. But he is missing an opportunity to rein in or even reverse Iowa’s runaway spending on tax credits, which has contributed to unmet needs in our state.

owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org