The Elbert Files: What we don’t know
“We don’t know what we don’t know.”
That’s the crux of a recent essay by Jonathan Wilson in the Des Moines Register.
Wilson, a longtime Des Moines lawyer and former school board member, said the don’t-know principle – combined with the adage “you can’t teach what you don’t know” – explains how a civilization “devolves and, essentially, dumbs-down the citizenry.”
Think about it: If we quit teaching history, science and critical thinking skills, wouldn’t it resolve many of the policy issues facing this year’s Legislature?
Of course, it would also drive Iowa’s once-proud system of public schools even farther into the ground. But who would be around to notice, if we don’t know what we don’t know?
The same logic applies to the massive tax cuts Republicans recently approved and signed into law.
The speed with which they moved was astounding.
In the past, thoughtful lawmakers formed outside committees and held extensive hearings before making changes to complex tax policy. The process took months, sometimes years. It was designed to minimize surprises down the road by incorporating a broad range of opinions and information.
Sometimes it resulted in no meaningful changes. But that was OK, because the system discarded untested and questionable proposals.
As near as I can tell, the only public discussion about this year’s tax cuts was in the form of vague campaign promises, which always sound good during election season.
This year, Republican lawmakers shut down any meaningful discussion, which kept the rest of us from even being able to know what we do not know.
One example is the fiscal note that Iowa’s nonpartisan Legislative Services Agency prepared for the proposed changes.
The agency’s fiscal notes are designed to provide reasonable summations of the fiscal impact that changes could have on state finances.
This year, because of the speed at which the tax cuts moved, the fiscal note was much shorter than similar notes have been in the past.
But there was still enough to get a sense of the danger when you do the math.
According to LSA, the tax cuts will result in income decreases in future years ranging from $236 million in 2023 to $1.9 billion in 2028 when all of the cuts are implemented. That’s a total decrease of $6.6 billion over the next six years.
Today, the state government is sitting on a $2 billion surplus, but it won’t last long at that rate.
Another way to look at it is that the state government will soon need to either cut spending by roughly 20% or find new revenue sources to offset the lost income.
Gov. Kim Reynolds and other Republicans say the lost revenue will be made up by economic growth inspired by the tax cuts.
Which brings us to another thing we either don’t know or choose to ignore.
Concentrating the bulk of income tax cuts in high-income brackets has not in the past spurred growth, and there is no reason to think it will now.
That’s the conclusion of retired Iowa Department of Revenue manager and analyst Mike Lipsman, who had a close-up view of state finances for decades.
The bulk of future state budget cuts will mean significantly less money for public schools because education is the largest component of state finances.
In a recent unpublished article, Lipsman noted the damage that has already occurred to education, including the fact that Iowa’s prized leadership in public education fell to No. 24 in U.S. News’s 2021 annual ranking of public schools.
He added that funding for Iowa’s regent institutions, which include our three public universities, peaked at $776 million in 2009 and “dropped 21 percent to $613 million by 2021.”
Also, Lipsman reported that at a time when emerging technologies are essential, the number of full-time science and engineering graduate students at Iowa State University and the University of Iowa fell by more than 20% between 2010 and 2019.
That’s just some of what we don’t know about the tax cuts that include Iowa’s move to a 3.9% flat tax.