The Bait and Switch

Editorial: Leading up to the year 2013, Iowa was ranked 40th in the nation in disproportionate property tax burden between homesteads and commercial property, with commercial property taxed 2.25 times more than that of homesteads, according to a 2012 report from the non-partisan Tax Foundation, Washington, D.C.
The data showed that commercial property like corporate buildings, industrial plants and railroads were taxed at 100 percent of their value, while residential properties were taxed at approximately 54 percent of their value. It was the belief of many in the legislature from both political parties that the high tax rate for businesses was causing Iowa to lag behind its neighbors in attracting new corporations to set up shop in Iowa.
So, in 2013, bipartisan legislation was passed that decreased the property tax rate of companies to 90 percent of their value, with residential property tax rates rising to approximately 57 percent, according to the Des Moines Register. In order to compensate for the potential loss in taxable value in counties, cities and school districts, the state agreed to make up the difference by providing backfill payments.
In 2013, it was estimated that taxpayers would save $254.4 million in fiscal year 2018. It was predicted the business would thrive and more corporate competition would relocate to the state.
Three years later, Iowa has paid a total of $391 million to Iowa's cities, counties and school districts, according to the Des Moines Register, and local governments have missed out on additional revenues to the tune of approximately $107.2 million. Three years later, Iowa still ranks 40th in the nation in the Tax Foundations 2017 State Business Tax Climate Index. For reference, Missouri ranks 15th, Nebraska 25th and Wisconsin 39th.
According to a Des Moines Register analysis, tax savings in fiscal year 2017 were an estimated $157.6 million, Commercial properties accounted for about $125 million of that tax break. 
Meanwhile, local governments lost $84.7 million last fiscal year, and schools lost $22.5 million, according to the Iowa Legislative Services Agency.
Now, the money that cities, counties and school districts rely on as part of the tax reform deal is on the chopping block. With the authorization on behalf of Gov. Kim Reynolds to borrow $13 million from the state’s economic emergency fund to cover a $14.5 million budget hole, Reynolds was non-committal to guaranteeing those backfill payments, which totaled near $150 million in fiscal year 2017. Legislators were also non-committal in a Des Moines Register interview, as the state is already proposing cuts to the 2018 budget, after $118 million in cuts to last year’s budget, which hit education very hard ($18 million to the Board of Regents and $3 million to community colleges).
Being fiscally responsible and conservative with service costs and revenues is one governing philosophy, but what the governor and the legislature are doing is what those in the consumer world call “the bait and switch.”
Cities, counties and school districts relied on the corporate taxable values in order to balance out their budgets. When this tax reform legislation came up, these entities pushed against it for fear it would force steep property tax increases or the reduction of services. The only way such legislation could pass and be favorable to the public was if Iowa leaders found a way to adjust for that lost revenue, which is why they promised backfill payments. Now, the Iowa leadership is in a position to rescind that promise, in the name of fiscal responsibility, amid steep budget cuts to city and county services, as well as education.
Just this year, the state went through with just a 1.11 percent average increase to education funding — just a $40 million increase to public schools. Single percentage increases below five percent have been a staple of legislature increases, as schools grapple with ever-rising costs of education, technology and transportation. And despite the property taxes paid by residential and corporate people and entities that go towards education, still, cuts continue.
     Sure, it can be said that the 2013 era of leadership was going through with this with the best of intentions to increase Iowa’s competitiveness, and encourage state investment. It can also be said that the estimates given to the legislature on savings potential were wrong, which couldn’t necessarily have been predicted. However, according to the Des Moines Register, the 10 percent tax break for companies "disappears" for bigger businesses, due to rising property assessments, meaning that even in the construction of the legislation, oversight was foregone.
Besides, according to recent actions taken by the legislature, Reynolds and former Governor Terry Branstad, can we really blame the bait and switch on poor estimations?
The call to arms among the conservative-led administration is a fight for individuality, for freedom of governance and spirit, for deferring things back to the individual.
     That’s not what the track record of laws shows. It shows inconsistency and punishing Iowans for it.
Back in March, it became law that counties could no longer raise their own minimum wage levels, and must conform to a statewide minimum wage rate of $7.25 per hour. Though Branstad argued he did support a raise to the minimum wage, he signed a law that favored uniformity amongst the counties, rather than keeping the freedom exercised by counties and cities, as well as negating competition amongst communities and counties across the state.
That same day, he signed a bill that limited workers’ compensation for those who are injured on the job, for the sake of lowering costs to businesses, as he said in a Des Moines Register story, thus keeping these businesses “competitive” among other states.
     Back in early Feb., Chapter 20 was amended, deleting all the options on which unions could collectively bargain for across the state, rather than let individual, smaller governments and schools decide what they’d like to negotiate, to make things more “competitive.” That word “competitive” seems to always come up before a budgetary action is taken to justify why a service should be cut, or taxes cut. Iowa’s budgetary problems are not overestimation problems. They’re deep errors in political ideology that favor businesses over people, and city and county culpability over state promises.
Just this past August, Apple was given $213 DOESN’T SAY HOW MUCH MONEY in tax breaks from the state and the City of Waukee, for the creation of 50 jobs.
In fact, Google, Microsoft and Facebook, as well as Apple, have received a combined approximately $313 million in tax breaks over the last decade… nearly the total of all three fiscal years of backfill payments.
Reynolds and the legislature say that these tax breaks make Iowa competitive — it is Apple after all.
It’s not competitive.
According to state records, in 2010, the state estimated it was losing approximately $12.1 billion in revenue, thanks to tax credits. For reference, Iowa’s most recent budget was $7.2 billion.
This is not competition.
This is a bait and switch, and it’s been happening for the last four years. Iowans have been promised better schools, better services, more businesses and all for cheaper taxes.
What they’re getting is budget cuts, steeper college tuition and possibly property tax increases.