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Thursday, December 9
Iowa Tax Reform in 2005?
by
Chad Thompson
on Thu 09 Dec 2004 09:31 AM CST
 Iowa Tax Reform in 2005?
I caught
a few reports on Tom Vilsack speaking to the "Iowa Taxpayers
Association" yesterday on WOI Radio with proposals to reform the Iowa Tax Code, and today David Yepsen writes a column with some of the highlights.
I point you to the column to read Yepsen's comments on the details of the proposal, but here are the points Vilsack addressed:
Eliminate federal deductibility.
This
proposal has been on the table for some time. Iowa is one of the
few states that allows you to deduct federal taxes from your state
return - but in order to make up for the smaller taxable income, tax
rates are kept higher than they would be without the federal deduction.
It is a
little disappointing that we treat this as an urgent proposal.
Truthfully, I imagine that this subject is better talk-radio fodder
than substantive input for corporate accounting departments.
Eliminate the state income tax on all pension and Social Security income.
The reason that Yepsen atrributes to Vilsack for this strikes me as fairly odd:
In
the past, he rejected this idea, arguing that since the state already
exempts some of this income, exempting all of it would benefit only
well-to-do Iowans.
When I
think of friends and relatives that rely on Social Security and
pensions to provide retirement income the term "well-to-do" is not the
first term that comes to mind.
Considering
that increases in property taxes and health care costs have hit seniors
on fixed incomes particularly hard, providing whatever relief we can
with the state tax code seems to be a good idea.
The trick here, however, is to keep such a reduction
revenue-neutral. (Of course, this also depends on what is meant
by the phrase "some of this income" - does anyone know what the limits
are?)
Expand the base of the sales tax.
The examples used by Vilsack seem to make sense:
He wants the sales tax to apply to more services, such as engineering and accounting fees.
As the
legislation-writing unfolds, we should keep an eye on "which services"
are taxed. (Yepsen accuses Vilsack of pandering to his interests
by exempting legal services from taxes. There are arguments to be
made, but I do know that a wage earner is far more likely to use the
services of a lawyer than the services of an engineer.)
Allow Iowans to vote on any proposal to increase sales- or income-tax rates.
Yepsen calls this a "compromise" position - but it seems to be a horrible idea.
Why?
When we're in a situation (as we are now) where all reserve funds for
state government are tapped, the legislature will need some flexibility
in raising funds without going through an electoral process to approve
small increases in service and sales taxes.
Do we
really think we could do without some vital services (such as last
year's cutbacks in State Patrol hours and patrolled territories) while
we wait six to nine months for an election to be held?
I would
feel better about this proposal if state funding was on firm footing -
but it's not. Last year's budget was balanced by using "one time"
sources of funding: tough decisions will have to be made this
year regardless of the political situation.
Besides - if our we don't want our legislators to make decisions on
fiscal and economic policy, why elect them in the first place?
For the "social issue showboating" that last year's GOP leadership
highlighted?
Create a higher state earned income tax credit for lower-income Iowans and make it refundable.
This is agreeable, however I am bothered by the notion that changes to
tax policy are the only way working families can see an increased
standard of living.
I would
like to see this proposal go hand-in-hand with some form of increase in
the minimum wage and a strengthening of labor laws.
I'm obviously not a tax-law policy wonk, but those are my first
reactions to what is likely to be the first topic introduced in
Vilsack's "State of the State" address.
What are your thoughts?
Tuesday, December 7
The Trillion Dollar Social Security Hustle
by
Chad Thompson
on Tue 07 Dec 2004 11:29 AM CST
 The Trillion Dollar Social Security Hustle
Yesterday may have brought the first salvo in the fight for Social Security. From Yahoo! News:
The
White House said on Monday for the first time that Bush's plan to add personal retirement accounts to Social
Security would be financed in part by new government
borrowing that could top $1 trillion.
Bush
has made reform of the U.S. retirement program a top priority in his
second term and will push for creating private accounts in a meeting
later in the day with top congressional leaders.
What's all this worth to the American public? From that same article:
A
recent analysis by the White House Council of Economic Advisers found
that tapping the bond markets to pay for private accounts would
increase the nation's debt-to-GDP ratio by 23.6 percentage points
by 2036.
Under
this scenario, the debt held by the public would increase by as much as
$4.7 trillion. But the new government bonds would be repaid 20 years
later, eliminating Social Security's unfunded liability while reducing
the tax burden in the long term, advocates said.
"[Bush], at this point, has not endorsed a specific plan," McClellan said.
But
Republicans say the Bush administration favors a plan that would allow
workers to voluntarily redirect 4 percent of their payroll taxes up to
$1,000 annually to a personal account.
So...
increasing the nation's debt to the point where the liability may
damage our ability to repay the treasury bonds that make up the current
Social Security Trust Fund - all for the possiblity of "up to" $1,000
annually in a personal account - assuming that this "up to" will
only occur for those earning in excess of the FICA cap of around
$86,000. (For an idea of what risks excessive borrowing creates, see this article from today's Economist.)
Is risking the entire system really necessary? Not really, according to an column today from Paul Krugman:
Projections
in a recent report by the Congressional Budget Office (which are
probably more realistic than the very cautious projections of the
Social Security Administration) say that the trust fund will run out in
2052. The system won't become "bankrupt" at that point; even after the
trust fund is gone, Social Security revenues will cover 81 percent of
the promised benefits. Still, there is a long-run financing problem.
But
it's a problem of modest size. The report finds that extending the life
of the trust fund into the 22nd century, with no change in benefits,
would require additional revenues equal to only 0.54 percent of G.D.P.
That's less than 3 percent of federal spending - less than we're
currently spending in Iraq. And it's only about one-quarter of the
revenue lost each year because of Bush's tax cuts - roughly
equal to the fraction of those cuts that goes to people with incomes
over $500,000 a year.
Given
these numbers, it's not at all hard to come up with fiscal packages
that would secure the retirement program, with no major changes, for
generations to come.
As Bill Clinton once said: "Mend It, Don't End It".
So if
the problem is really minor, what's really pushing this political
emergency? Simple, really - it's false market populism hidng a Trillion-Dollar Hustle:
With
our Social Security money entrusted to Wall Street, its
priorities will become the nation's priorities; its demands for
deregulation, de-unionization, low wages, and generous “stimulus”
packages whenever the Dow looks a little weak will be recast as
the demands of little old ladies in Beardstown and blue-collar
workers in Providence. Who would dare to legislate for higher
minimum wages, say, or stricter protections for arctic wildlife,
when such a move could be construed as an attack on the nation's
beloved retirees? Although we can only glimpse the possibilities
now, this mind-boggling reconfiguration of economic politics is the
real promise of privatization, the thing that makes it worth the
insane gamble: instantly, privatization would reverse the
polarity of the famous “third rail of American politics,”
transforming Social Security from the bane of the business
community into its most potent weapon, an argument-ending current
that would crackle through the fingers of every P.R. man and
corporate lobbyist. Touch Wall Street and you're dead.
To
follow a theme from John Drury's earlier post, is the Social Security
Trust Fund really worth gambling with for little to no real "upside" -
but the potential for disastrous "downside"? It sure is to the
Wall Street financiers that promise (yet again) untold wealth and
prosperity - we just have to place our faith in the market gods.
It would also transform Social Security into an anti-Labor club that could be the weapon used to justify cheap labor and globalization policies - anything to boost the stock price!
Another thing to keep in mind: Social Security has been one of the most successful government programs ever created.
This was the legacy of our parents and grandparents - what is going to be the legacy of the current generation?
Monday, December 6
Where Is The Next Generation of Farmers?
by
Chad Thompson
on Mon 06 Dec 2004 10:49 AM CST
 Where Is The Next Generation of Farmers?
Iowa winters typically bring about two things:
1. Packing the gym of the local high school for basketball games and wrestling meets.
2. Reflecting on the farm economy - the fall harvest, and what it means for next year.
By all accounts, this should be a good year at the basketball games and coffee shops. According to Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State:
"This year will be the perfect situation for Iowa farmers,"
Babcock said. "They have bin-busting crops and bin-busting government
farm payments."
However, there was another news release last week of the Iowa State Extension's "Iowa Farm and Rural Life Poll" which carries the tagline:
More than half of Iowa farmers surveyed would not advise their children to enter the family business
According to the article:
Fifteen-year-old
Chris Pelzer of Tipton is a farmer's son who thinks he has little
choice but to envision his future off the farm.
"The money's a
problem," he said, describing the economic realities that make this 4-H
member lean toward engineering or environmental science.
He's
not alone. The new Iowa Farm and Rural Life Poll from Iowa State
University Extension shows that 57 percent of farmers surveyed would
recommend their children choose a career other than farming.
"Families
are not encouraging their sons and daughters to go into farming. It
really revolves around capital, risk and lack of profits," said Paul
Lasley, an Iowa State sociology professor and co-author of the report.
The
survey's respondents say the top reason for young people not entering
farming is high start-up costs, followed by the high risks, low profits
and lack of available land.
The bottom line: the long-term economic picture remains bleak. Why? According to the survey:
High start-up costs: The
farm policies that were laid out in the 1970s were often summed up in
one phrase: "Get big, or get out". It takes an awful lot of
capital to "start big" - and that's not something that an inspiring
producer can do.
High Risks: In the
current environment of packer ownership of livestock and
government-bolstered commodity prices, a farmer is at enormous risk of
seeing the bottom drop out of a market when either the government
changes farm policy, or corporate owners of a vertically-integrated
supply chain decide to push livestock prices down in order to improve
margins. (Or corporate owners could potentially outsource livestock production altogether or take advantage of government loopholes to boost profit margins at the expense of the average producer.)
Low Profits: Current
government subsidy policy is set up to encourage overproduction -
something that is inherently bad for the producer, but good for the
processor. "Freedom To Farm" has been transformed into the
"Freedom to Go Broke".
Lack of Available Land:
As farms are forced to get bigger, they're forced to put more land into
production. Bigger farmers have access to capital that drives
land prices out of the reach of smaller producers.
With the reasons given in the survey, it's easy to see that the
competitive field is biased toward large "corporate" farms and
multi-national agribusinesses - squeezing the smaller farmers out of
existance. Sound familiar? It should - this is the
"Wal-Martization" of agriculture, happening right before our eyes.
With all of this happening, you would think that organizations that
have been set up to support and represent farmers would be fighting
tooth-and-nail to protect the very people they represent, right?
Well.... maybe not:
While start-up costs and a lack of available land certainly played a
role in the poll’s outcome, Putze said the ever-increasing regulatory
environment and activist presence in the state certainly haven’t helped.
“Calling farmers terrorists and child abusers - as some activist groups
have done - and defining a factory farmer as anyone who needs a permit
to operate doesn’t go far in welcoming the next generation onto the
farm,” Putze said. Iowa's
producers are going to have to realize that their economic and social
fabric is being destroyed by the growing demands of corporate
profiteers - not by the activists that are speaking up for the quality
- and continuation - of the rural lifestyle.
The groups that purport to "support" Iowa's farmers do them no such
favor by embracing the pro-corporate agenda that has been decimating
the economic and social fabric of rural Iowa.
If you're interested in really supporting Iowa's farmers, the
Iowa Farmers Union would be happy to hear from you - and so would we.
What do you think is causing farmers to tell their children to leave the farm?
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