Federal tax changes boost Iowa revenue growth

The State Capitol dome is illuminated by the sunset in Des Moines on Thursday, Feb. 16, 2017. (Rebecca F. Miller/The Gaz
The State Capitol dome is illuminated by the sunset in Des Moines on Thursday, Feb. 16, 2017. (Rebecca F. Miller/The Gazette)

CEDAR RAPIDS — Thanks in part to changes in the federal tax code, Iowa revenue collections increased 4.5 percent, or nearly $290 million, in the fiscal year that ended June 30.

The non-partisan Legislative Services Agency reported general fund receipts grew $287.8 million, to $6.685 billion, in fiscal 2018 — from $6.937 billion the previous year.

The numbers won’t be final until the state closes its books in September. Jeff Robinson, a senior fiscal analyst said there’s a “good chance” those number could be lower.

However, he expects it to be more than the Revenue Estimating Conference estimate in March for 2.8 percent revenue growth.

Some of the revenue growth is attributable to changes Congress made in the federal tax code, Robinson said.

Decreased federal withholding increases state withholding simply because of federal deductibility. That allows Iowa tax filers to deduct their federal tax payments from their Iowa tax liability.

“How much of the $290 (million)? Maybe $40 million, but (it’s) really not possible to say conclusively,” Robinson said.


Withholding picked up significantly after the federal tax tables were adjusted in early February, he said.

Net income tax revenue, which grew nearly $241 million, or 7.2 percent, for the year, made up the bulk of revenue growth, LSA reported. Sale tax revenue increased $69 million and insurance and other taxes were up $1.3 million.

All other tax sources showed decreases, the Legislative Services Agency said. Net corporate income taxes fell $3.8 million — less than 1 percent.

Franchise taxes were down 35 percent, or $13.3 million.

The Legislative Services Agency also reported that June net general fund revenue was almost $61 million, or 9.6 percent more, than the June 2017 revenue level.

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