May's record Iowa state tax receipts top $1 billion

DES MOINES – Iowa's state treasury posted its first-ever billion-dollar month in May.

Iowa taxpayers paid nearly $1.023 billion in state taxes last month, topping the previous record month for tax receipts by more than $200 million. State tax collections previously totaled $794.5 million in May 2012, $791.1 million in May 2007 and $782 million in May 2011.

“It's the biggest single month we've ever had,” said Jeff Robinson of the Legislative Services Agency. Even after refunds were deducted from the gross receipts, the state's net tax collections for May totaled $917.9 million.

The major surge in state tax receipts was tied directly to federal tax law changes that took effect last Jan. 1, Robinson said. To avoid facing the prospects of higher tax rates in 2013, many individuals and corporations facing uncertainty in December took steps to record income in 2012 that would be subject to lower taxation even though in the end the federal changes that were adopted mostly hit high-income brackets the hardest.

“Corporations gave out lots of dividends at the end of 2012 to get rid of cash that would be taxed at a higher rate if they waited until Jan. 1. People sold assets because capital gains taxes were going up and those that had the ability got paid income in December rather than January,” Robinson noted. “That's what caused this month to be bigger and it's a considerable portion of why we're so far above estimates.”

Iowa's billion-dollar May came one month after the state experienced a record April that produced $743.6 million in state tax receipts and marked back-to-back months of double-digit growth, according to the Legislative Services Agency. April's 17.6 percent spike was fueled by delays in farm tax returns also tied to federal tax law changes. Last month's total gross tax receipts were up 16.8 percent compared to May 2012 and net collections were up 15.5 percent over a year ago.

Driving May's record numbers was a 33.1 percent spike in personal income taxes paid by Iowans prior to the April 30 deadline for filing state income tax returns. Iowans paid $560.3 million in individual income taxes last month, an increase of $139.2 million compared to May 2012 that included payments with returns that accounted for 86.7 percent of the monthly increase.

For the year, personal income tax receipts have grown by $427.2 million, or 12.8 percent higher than the first 11 months of fiscal 2012. The unprecedented growth in personal income tax collections offset declines in sales/use and corporate income tax receipts for May, although sales/use tax receipts have grown $39 million and corporate income tax collections are up $45.2 million for the year.

While Iowa's economic and tax revenue trends remain good, Robinson said the sluggish sales/use tax receipts are “troubling.”

With one month remaining in the state's 2013 fiscal year, total state tax receipts were running 7.7 percent higher than a year ago and about 2 percent above the projected yearly growth set by the state Revenue Estimating Conference.

Due to Iowa's federal deductibility law, Robinson said state tax receipts a year from now likely will be negative compared to May 2013.

“Iowans paid a whole lot more federal taxes than they normally do this year,” he said. “They will deduct that next year and we will have the opposite effect as they deduct their higher-than-normal payments. Next year is going to be another one of those that have lots of caveats in it as we track it.”

Comments: (515) 243-7220; rod.boshart@sourcemedia.net