Tax reality: No pumpkin spice added

It’s so easy to overdo it — with pumpkin spice or with tax-cut rhetoric. Keep it simple. The tax cuts are for the wealthy, and come at great cost of services while making the tax system less fair.

You find it everywhere these days: pumpkin spice this, pumpkin spice that … tax cuts this, tax cuts that. It’s so easy to overdo it — with pumpkin spice or with tax-cut rhetoric.

Keep it simple. The tax cuts are for the wealthy, and come at great cost of services while making the tax system less fair.

Just ask the Iowa Department of Revenue, which produced the following analysis in May, just before state legislators rammed their backroom tax package for the rich through both houses of the Legislature and to the Governor’s desk. Yes, she signed it.

And here are the numbers behind those sections of the pumpkin above:

Put another way, almost 40 percent of resident taxpayers will get about 3 percent of the benefit of the tax cut in tax year 2021; over four-fifths of taxpayers will together see only about 26 percent of the benefit. On the other hand, the top 2.5 percent — families making over $250,000 — will receive 46 percent of the benefit.

This was a tax cut for the richest Iowans, who did not need a cut, and the bill overall will cost almost a half billion dollars in 2021.[1]

These effects have been apparent for months,[2] despite claims that are obvious distortions, according to the Department of Revenue analysis.

That analysis shows the average tax change in tax year 2021 for people making between $50,000 and $60,000 — this covers the latest median-income level of $58,570 — would be a $156 cut, or less than $3 a week. Don’t spend it all in one place. Meanwhile, the cut for millionaires would, on average, be $24,636.

By the way, the “fact checkers” who let loose-speaking pols off the hook for their exaggerations about tax cuts are often missing a critical point: Many Iowans, including some middle- and moderate-income working families, actually will see tax increases, or no change at all, if the new law is not changed.

Of course, most won’t see these effects right away, despite the promises. How convenient.

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

 

[1] Iowa Department of Revenue analysis for Legislative Services Agency, May 2, 2018

[2] Charles Bruner and Peter Fisher, Iowa Fiscal Partnership, “Tax plan facts vs. spin,” May 5, 2018, http://www.iowafiscal.org/tax-plan-facts-vs-spin/

See also: “A Roadmap for Opportunity: What real tax reform would look like,” Iowa Policy Project, http://www.iowapolicyproject.org/2018docs/180906-roadmap-taxes.pdf