CORONAVIRUS

State tax collections in Iowa plunge because of faster refunds

Effects of coronavirus will show up later

Iowa on Wednesday reported a 9 percent decrease in tax revenue for March, mainly because the state has pushed to get tax
Iowa on Wednesday reported a 9 percent decrease in tax revenue for March, mainly because the state has pushed to get taxpayer refunds out earlier this year. The impact of coronavirus restrictions likely won’t show up until this month, and it may be as late as August before the financial impact of business closings and job losses is known. (The Gazette)

DES MOINES — State tax collections took a 9.1 percent plunge last month, but the decline was not due to the COVID-19 pandemic but rather to the state more quickly getting tax refunds to individuals and corporations, according to the Legislative Services Agency.

Overall, state tax receipts stood at $5.825 billion at the end of March — a 4.2 percent increase of $233.6 million over the first nine months of fiscal 2019 — despite a $34.3 million decline in the monthly collections, said Jeff Robinson, a senior tax analyst at the Legislative Services Agency.

The state saw monthly growth in its three major revenue categories of personal income tax, sales/use and corporate income tax.

But March’s numbers were pulled down by a spike in tax refunds paid out — $70 million more than in March 2019 and about $100 million more over the past two months, Robinson noted.

But the March report may be the last vestiges or normalcy, with businesses slated to remit sales tax receipts and income tax withholdings by mid-April.

That’s when Robinson said he expects the state revenue numbers to start to get “weird” as the negative economic effects of the COVID-19 pandemic start to surface.

“We’re going into a black hole of not knowing what’s going on.” he said.

This month is when the effects of Gov. Kim Reynolds’ emergency orders closing many non-essential businesses — along with job losses and later taxpayer deadlines — will begin to play havoc with a fiscal 2020 estimate that predicted the state’s revenues would grow by 3.2 percent by June 30.

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“It’s amazing how the world has changed” since the state Revenue Estimating Conference set that revised estimate in mid-March, Robinson said.

Now, he said, that estimate looks overly optimistic, given the dramatic changes that have transpired since Iowa reported its first positive COVID-19 cases March 8.

“When that (REC estimate) was made, nobody had shut down anything, and the president was telling us we didn’t have to worry about anything,” Robinson said. “A lot changed in the week after that estimate. I think it was a good estimate for that day, but a lot has changed since then.”

Changes to Iowa’s sales tax law to expand the items and services covered had pushed growth in that category to 7 percent for the first nine months of fiscal 2020, but Robinson said it’s likely that will be “as good as it gets.”

Robinson said it might not be until August when all the taxes have been collected and refunds have been paid that a clearer picture may take shape on how COVID-19 is reshaping government tax receipts and budgets.

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

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