August 2007

Our Destiny Lies NOT in Tax Trickery
By Dr. Don Racheter

The recent overwhelming rejection (15% for, 85% against[1]) of “Project Destiny” by the voters of three central Iowa counties (Dallas, Polk, and Warren) is further evidence that taxpayers do not appreciate politicians, bureaucrats, and other elites trying to manipulate and deceive them.  Project Destiny involved an attempt to raise the sales tax in these communities by 17% (from six to seven cents on the dollar) and use the proceeds for cultural attractions like bike paths, the zoo, and botanical center as well as unspecified “capital improvements,” “debt relief,” and “property tax relief” by the local governments in the three counties.[2]

A special “Yes to Destiny” committee was formed to promote the tax increase and reportedly raised and spent over $750,000 on their effort, while the “No to Destiny” opposition only raised and spent around $7,000.[3] The head of the opposition group, George Davey, explained the very disparate results of the 99 to 1 spending disadvantage by saying “When you’re peddling facts against fiction, you get a lot of bang for your buck!”[4]  One opponent alleged that the “Yes to Deceit” campaign put out brochures that trumpeted the projected property tax reductions without ever mentioning they would be funded by the sales tax increase.[5]

Since everyone pays sales taxes, including poor and working Iowans, while only those who own property get a break when property taxes are lowered, and those who own large amounts of property get the largest breaks, it was not surprising that labor unions and other groups that champion the poor and working class joined the tax groups in opposition to Project Destiny.[6]  Government leaders who were championing the plan were not as credible because of recent failures by school officials to spend money raised by a tax increase as promised and because of the Central Iowa Employment and Training Consortium (CIETC) scandal.[7]

Many taxpayers also suspected the promised property tax relief would be a sham.  What one pays in property tax is a multiplication of the millage rate times the assessed valuation of the property, so even if the tax rate is reduced, if the assessed value of the property is increased, the taxpayer may end up paying as much, or even more, from the supposed “tax cut.”  Having seen this ploy played out time and again by government officials, taxpayers were understandably suspicious of how much, if any, benefit they would actually receive from the Project Destiny plan.

We have seen many instances where Iowans have voted by over 60% to approve increased taxation for bonds to construct a new elementary school in a district with increased enrollment when officials have made a case with the facts.  However, when leaders try to “pull a fast one,” or are perceived as doing so, as happened with Yes to Destiny, taxpayers are quick to use their constitutional protection of the right to vote on increasing their taxes to “just say NO.”  It is vital that we not give up this right to vote on sales tax increases, bond issues, and other proposed tax increases as has been proposed in the Iowa Legislature by the Iowa Association of School Boards.[8]

Dr. Don Racheter is President of Public Interest Institute (PII) and a member of the Board of Directors of Tax Education Foundation.

The views expressed herein are those of the author and not necessarily those of PII or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] http://www.msnbc.msn.com/id/19703338/
[2] http://www.desmoinesmetro.com/projectdestiny/mac_taxdistribution.doc
[3] http://www.kcci.com/news/13658634/detail.html
[4] Ibid.
[5] UrbandaleGuy posted the following on Thu Jul 05, 2007 9:15 am at http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20070705/OPINION04/707050341/1035/archive

What is wrong with the “Yes to Deceit” crowd? On Monday 7-2 we received yet another brochure, in the mail, promoting this tax and spend scheme.  Once again the colorful and well crafted brochure men-tioned, four different times, the words “lower your property taxes” and “cut property taxes.” Once again it stated that if we vote yes for this proposal, that our kids and grand kids will magically stay in Iowa.

And yet, once again, in the entire language of the sales piece, these people conveniently left out ANY mention whatsoever of this being a tax increase of any kind … let alone that it is a 16.7% increase in the sales tax that everyone, including those with lower incomes and those who rent or live in mobile homes, will pay!

I understand that many, if not most, of those actively involved in the promotion of this regressive tax increase own or control large amounts of property, and will benefit greatly from shifting their tax burden to others. However, I will never understand why they would continue with these tactics designed to mislead those who may not be paying close attention.

As my son’s 19 year old friend told me today, “people are not leaving Iowa because we do not have enough bike trails. They are leaving Iowa because we have too many taxes.”
[6] http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20070626/NEWS/70626009/1001/RSS01
[7] http://www.kcci.com/news/13524780/detail.html
[8] http://www.ia-sb.org/LegislativeAdvocacy.aspx?id=1018