Des Moines, Iowa — The most recent accounting shows total state tax collections dropped over seven percent in the past 12 months, due to a business tax break.
Much of that $629 million drop is due to a nearly 78 percent decline in a tax paid by the owners of Partnerships, S Corporations, and Limited Liability Companies. In 2023, Iowa lawmakers created a new, refundable tax credit for the owners of these types of businesses. The tax break was retroactive to January 1st of 2022. The state’s two main sources of tax revenue are sales taxes and the income taxes individuals and couples pay. Those payments increased, slightly, over the past 12 months. Eric Richardson is a fiscal analyst with the Legislative Services Agency.
This was the third consecutive fiscal year that state tax revenue dropped, a move Republican lawmakers say is expected due to tax cuts they’ve approved. A final report on tax collections for the state fiscal year that ended June 30th will be completed in mid-September.
There may also be Iowa tax refunds issued that should be subtracted from total state revenue for the previous fiscal year. In March, the State Revenue Estimating Conference predicted total state revenue would fall 6.4 percent during state Fiscal Year 2025. Current accounting shows the drop was one percent lower.
KIWA Staff Photo
