Iowa tax revenue up 3.9 percent in October, despite forecast downturn

CEDAR RAPIDS - Although corporate income tax deposits fell in October, overall Iowa tax revenue increased nearly 4 percent for the month, the Legislative Services Agency reported Wednesday.

Revenue increased 3.9 percent for the month, which is good news for the state in light of revenue forecasts being revised downward. This fall, the state's Revenue Estimating Conference lowered its revenue estimate by $125 million even though state receipts have been holding close to the panel's prediction of a 4 percent increase over the current fiscal year.

Aided by an increase in the state motor fuel tax, overall net tax revenue has been growing at an annual rate of 6.5 percent to 6.7 percent since June, according to Jeff Robinson, senior legislative analyst with LSA. Over the past 12 months, individual and corporate income tax, and fuel and banking taxes have posted strong gains. While sales/use tax growth has slowed recently, growth was modestly positive for the month of October and for the past year.

The growth looks stronger for the 12-month period ending October 2015. Net revenue from all taxes totaled $7.929 billion, an increase of $495.1 million or 6.7 percent, compared to the prior 12 months. Major contributors to the year-over-year dollar and percentage changes include a $268.5 million increase in individual income tax deposits.

After two years of significant swings caused in large part by changes in federal income tax rates and the introduction of an Iowa Taxpayer Trust Fund Tax Credit, the Iowa individual income tax has returned to its role as the main driver of Iowa tax revenue growth, Robinson reported.

Corporate income tax grew by $35.5 million, 8.5 percent, for the 12-month period. However, corporate income tax net deposits declined significantly in October as gross receipts were down for the month and tax refunds issued posted a large increase.

Overall, sales/use taxes were up $40.2 million, or 1.6 percent. Gross tax receipts from the sale of vehicles, which are deposited to the Road Use Tax Fund, increased 6.6 percent over the last 12 months, but sales/use tax deposited to the state general fund decreased 3.8 percent.

Over those same 12 months, refunds of general fund sales/use tax payments increased $45.1 million.

Robinson explained the combination of low general fund sales/use tax growth and high general fund sales/use tax refunds that has produced the recent lackluster growth in net sales/use tax revenue.

Fuel tax revenue was up 25 percent or $115.0 million, due to a combination of more fuel being sold and an increase in the state motor fuel tax. Gasoline/ethanol sales increased by 0.8 percent gallons and diesel sales increased 1.3 percent, LSA said.

Looking at the six months since the state raised the fuel tax, net deposits increased $111.6 million or 41.8 percent.

According to Racing and Gaming Commission statistics, eight Iowa casino/track locations recorded negative annual adjusted gross revenue growth for the 12 months ending October 2015. The combined adjusted gross revenue change for 19 state-licensed facilities, including a new casino near Jefferson, was positive 2.4 percent over the previous 12 months.

Across all facilities, the adjusted gross revenue for the 12 months totaled $1.426 billion, an amount that is 2.9 percent below its December 2012 peak.

Cigarette and tobacco tax increased by $6.3 million, or 2.8 percent.