The $54 question

It’s a political parlor trick. Hold down funding for key priorities, then show a surplus and call it an “overpayment.” Does anyone really believe that kind of spin?

Breaking news out of Des Moines is that many Iowa taxpayers will be eligible for an extra $54 tax credit.

This is the result of one of the most short-sighted pieces of legislation passed by the Iowa General Assembly in recent years. Lawmakers created what they called the “Taxpayers Trust Fund,” which we should call the “Giveaway Slush Fund.” It’s a pot of money to dole out to taxpayers and boast about at election time. Chances are, the “givers” won’t give you the whole picture.

Their game is an illusion, a political parlor trick: Hold down funding for key priorities, such as K-12 education, or universities, and then when revenues create a surplus, call it an “overpayment” by taxpayers.

Does anyone really believe their spin? The $120 million to be given away represents easily $120 million in services that could have been provided. For K-12 alone, a little over half of it could have been used this year to fully pay the state’s share of allowable growth at the 4 percent level lawmakers authorized. Instead, state funding only supports half of the state share.

By shortchanging school districts with funding for only 2 percent allowable growth this year despite strong revenues, lawmakers compounded a trend of squirreling away big dollars while claiming poverty. This way, they have given themselves $120 million to spend on dessert — the Giveaway Slush Fund — by choosing not to pay the state’s share of the bill for the meat and potatoes: school aid.

One Iowa columnist who has seen through this is The Des Moines Register’s Rekha Basu, who noted Sunday: “Doling out money piecemeal is a gimmick that may bring smiles to some faces but it can’t take the place of sound and consequential actions.” She’s right.

Is it really worth it to you to receive the $54, instead of putting adequate and appropriate funding back into our education system? Or cleaner water? Or safer streets? Or, well, you get the idea.

Give me a break. On second thought, don’t.

Mike OwenPosted by Mike Owen, Executive Director

Does Iowa know when to walk away?

You can almost hear Kenny Rogers singing in the background: “Know when to walk away, and know when to run.”

Peter Fisher
Peter Fisher

There’s Texas Hold ’Em,” and then there’s “Iowa Fold ’Em.”

Wouldn’t you just love to play poker against the folks who run this state?

They never call a bluff. Companies come calling with demands for tax breaks and big checks, or they’ll build somewhere else. And Iowa just happily falls in line with the demands. You can almost hear Kenny Rogers singing in the background: “Know when to walk away, and know when to run.”

The latest: Today the board of the Iowa Economic Development Authority (IEDA) is scheduled to consider sweetening its already generous offer to Orascom — $35 million to build a $1.3 billion fertilizer plant in Lee County — to about $110 million with a slew of new tax credits. As The Des Moines Register points out today, that’s $110 million for 165 “permanent” jobs paying on average $48,000 a year, plus construction jobs that will be gone when the project is finished.

The state tax credits are in addition to the enormous benefit the state is providing by allocating federal tax-exempt flood recovery bonds to this project. If the interest rate difference — between taxable and tax-exempt bonds — were 1 percentage point, the company would save $320 million in interest payments over the life of the $1.2 billion bond. That would bring the firm’s total benefits to $2.7 million per permanent job, a truly astounding number. Even without considering the federal interest subsidy, the state tax credits would total $687,500 per job, many times the typical level of subsidy in deals such as this.

There are no estimates available about the potential environmental costs that will be caused by this plant. Since Iowa does a poor job of monitoring for pollution damage, those ongoing costs might be low, but if there is an accident, it could be costly.

The Register also quotes Debi Durham, head of IEDA, that incentives wouldn’t be needed if Iowa were to reduce corporate income tax rates. Nonsense. Research has shown repeatedly that this is a myth, and that in fact, Iowa’s income taxes paid by corporations are competitive with other states. In many cases, giant corporations are paying not a dime in income tax yet getting huge subsidy checks from the state to do things they would do without incentives.

This hand is the one we are dealt from years of unaccountable economic development strategies by Iowa state government.

Time for a fresh deck.

Posted by Peter Fisher, Research Director

What smaller government looks like

Maybe you won’t notice cuts like those Lande announced Wednesday. Then again, maybe you want to take the kids to the lake this summer.

Mike Owen
Mike Owen

It was a previous Department of Natural Resources director who delivered the warning.

“I have gotten I don’t know how many complaints from legislators and small business owners about, ‘You used to do this and now you don’t any more,’” then-Director Rich Leopold told The Des Moines Register last year. “[Y]ou want smaller government, this is what it looks like.”

Now, for a fresh look.

On Wednesday, the Register’s Perry Beeman reported that current DNR Director Roger Lande informed his staff that the agency would eliminate more than 100 jobs. The excuse? Lack of funds.

This, at the same time Lande’s boss, Governor Terry Branstad, and state lawmakers are haggling over how much in tax breaks can be built not just into the FY2012 budget beginning July 1, but for the year after that, and structurally in the budget for years beyond.

As the Iowa Fiscal Partnership has pointed out, Iowans value many services that would not be available but for the public structures created by our tax dollars — education, law enforcement, safety-net services, and, yes, environmental quality. When Iowa already has substantially cut services and shown almost no restraint in its giveaways to corporations, some of which are subsidized not to pay any tax, should the DNR cuts be a surprise?

Maybe you won’t notice cuts like those Lande announced Wednesday.

Then again, maybe you want to take the kids to the lake this summer.

According to the Register article, the agency’s stream monitoring coordinator said remaining employees “will struggle to monitor lake and river pollution after the cuts.” So, take the kids — but maybe you’ll be jumping in the lake at your own risk.

Not a bad idea, perhaps, for some folks other than your family.

Posted by Mike Owen, Assistant Director

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