Iowa tax collections spike as people start spending again

Correction: The value of state tax refunds made as of Tuesday was $572.7 million. A lower amount initially was mistakenly provided to The Gazette. This article has been updated to reflect the correct higher amount.

DES MOINES — The roller-coaster effects of Iowa’s COVID-19 pandemic are skewing state tax collections — but in a good way.

After a period of economic shutdown intended to slow the spread of a novel coronavirus that has claimed at least 6,057 Iowa lives, state revenues are growing at an unprecedented pace as people spend federal stimulus checks and engage in more activities as Iowa reopens for business, travel and events, according to the nonpartisan Legislative Services Agency.

While the pandemic has made apples-to-apples fiscal-year comparisons difficult, Jeff Robinson, a senior tax analyst for the agency, said monthly data indicates state tax collections are up more than $1 billion in fiscal 2021, with double-digit increases in all major categories contributing to a 19.3 percent year-to-date growth rate.

“It is shocking,” said Robinson, who noted that fiscal 2020 tax receipts were “just crushed” by several months of shuttered COVID-19 precautions beginning in March last year that kept Iowans working from and staying close to home, slowed spending and delayed tax filing deadlines.

Those depressed spring 2020 months now are being compared with periods of economic growth spurred by COVID-19 vaccinations and pent-up spending capacity in a year when state income tax filings were delayed until the pushed-back deadline of Monday. For example, Robinson said, state tax collections last month were up 57.8 percent compared with May 2020, “which is a lot.”

“Where did all that money come from? One of the answers is the federal government,” he said.

“Sales tax took off like crazy,” he noted, and — while they’re not general fund receipts — state gambling tax collections from casinos hit record or near-record highs in two of the last three months.

Like last fiscal year, state tax collections, refund numbers and other financial transactions will be reconciled to the proper fiscal year by Sept. 1 so current numbers are tentative and the final yearly growth rate likely won’t end up being 19 percent, said Robinson — “but it still might be a pretty impressive number.”

At the same time, he said, fiscal 2022 tax receipts might return to a normal growth cycle but appear sluggish in comparison with monthly financial snapshots taken during this year’s high-tide rebound for sales and personal and corporate income tax collections, he noted.

Last month’s overall state tax collections rose by $307.9 million compared with May 2020, according to the agency’s monthly report.

“This is odd. This is really odd,” Robinson said of the surge in state revenue over the past two months as Iowans appear to be ready to spend money that built up during months of economic caution, noting “now it’s OK to spend, now it’s OK to go places and buy things.”

From a revenue standpoint, the state has weathered the worst of the pandemic thanks in part to the infusion of federal aid. But it still is struggling on the employment side of things as COVID-19 mitigation measures idled Iowans in record numbers before the economy began its rebound.

Monday was Iowa’s revised tax deadline after officials at the state Department of Revenue extended the normal April 30 filing and payment deadline for 2020 individual tax returns and first quarter estimated income tax payments for individuals due to COVID-19 pandemic disruptions.

The state's extension came after the U.S. Treasury also lengthened the time for individuals to file their federal taxes from April 15 to May 17.

John Fuller, spokesman for the state Revenue Department, said Tuesday the agency is processing refunds in 28.5 days, faster than its goal of 30 days.

As of Tuesday, the state had received 1,595,321 individual returns and issued 876,003 refunds totaling $572.7 million. That compared with 1,421,346 individual state returns received in 2020 with 959,009 Iowans getting refunds totaling $620.5 million.

You can check on the status of your refund, if you are due one, at tax.iowa.gov/wheres-my-refund.

Comments: (515) 243-7220; rod.boshart@thegazette.com