Guest Columnist

Don't fall for snake oil on tax cuts

The State Capitol Building in Des Moines on Wednesday, January 15, 2014. (Stephen Mally/The Gazette-KCRG TV9)
The State Capitol Building in Des Moines on Wednesday, January 15, 2014. (Stephen Mally/The Gazette-KCRG TV9)

Drew Klein of Americans for Prosperity emerged on the pages of The Gazette this week (April 24 guest column), promoting irresponsible tax policy that would enrich the wealthy few — many out of state — and set Iowa back for years.

His is an old pitch, a tired one and a frequently discredited one, but he keeps getting mileage with legislators who think they can sell his snake oil to voters. No doubt his clients are pleased.

But the stakes in Iowa right now have never been greater. Education, public health and safety rest on sustainable, long-term investments by our state that Klein and his cronies would devastate.

That makes this a time we ought to be making the most of responsible analysis and institutional memory. Both recognize the reality of Iowa’s already highly competitive standing vs. other states on business taxes, the severe damage caused by massive tax-cutting in Kansas and other states, and the failure of that strategy in Iowa.

On the latter, state analyst Michael Lipsman wrote in 2004 about the impact of Iowa’s 1997-98 tax cuts. Short story: The tax cuts, skewed in favor of the highest income groups, not only failed to boost the Iowa economy but are partly to blame for the decline in growth following the cuts.

Lawmakers could be asking him for his view. Just last week at the Capitol, retired state Senator Charles Bruner set up a public meeting on the realities of tax policy in Iowa and careful analysis of proposals on the table, and brought in Lipsman and also Peter Fisher of the Iowa Policy Project. All three would be on any serious short list of those to consult about Iowa tax policy and history. Only 10 legislators took advantage of it.

Just as people might not remember 20-year-old tax changes or a 14-year-old study of them that is still relevant today, they also may not have dug beneath the talking points about Iowa taxes vs. other states.

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Going to leading business accounting firms, such as Ernst & Young and the Anderson Economic Group, they would see Iowa is in the lower-tax half of states on business taxes.

A look at states that have experimented with severe tax cuts, such as Kansas, would show how reckless a strategy it can be. Kansas recognized its own folly, and has been reversing course.

Finally, Americans for Prosperity (AFP) promotes a notion that tax cuts are needed for Iowans to save “much of their federal tax reform savings.” This ignores that the savings are temporary because the federal tax cuts expire, and that Iowans would retain almost all — between 91 and 98 percent — of those temporary federal tax cuts even if Iowa did nothing to its tax code.

But those are just facts. Who needs ’em? Certainly AFP does not, but Iowans just might. Don’t drink the snake oil if you want to keep your schools running, your streets safe and your water clean.

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

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