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Iowa general fund revenue falls $729 million through May 2; pass-through entity tax, lower withholdings cited
Summary
The Iowa Legislative Services Agency reported net general fund revenue was down $729 million (9.9%) through May 2, 2025, driven by lower pass-through entity tax receipts, increased refunds and a drop in income tax withholding, leaving year-to-date growth below the Revenue Estimating Conference projection.
Eric Richardson, senior fiscal analyst with the Iowa Legislative Services Agency, said in the agency's April 2025 video memo that Iowa's net general fund revenue through May 2 fell $729,000,000, or 9.9%, compared with the same period in the prior fiscal year.
Richardson said gross receipts through May 2 were down 6.8%, but the larger decline in net revenue reflects a 10.7% increase in tax refunds issued from the general fund year to date. "Revenue has decreased $729,000,000 on a fiscal year basis or negative 9.9% year to date," Richardson said.
Why it matters: the year-to-date decline keeps growth below the Revenue Estimating Conference's most recent projection for total net-receipt growth (excluding transfers) of negative 6.1% for the fiscal year, Richardson said. That shortfall narrows the margin for other budget assumptions that depend on projected revenue.
Details from the memo show differences by tax type. Net individual income tax was down 0.6% year to date, net corporate income tax fell 6.9%, and net insurance and other taxes declined 75.5%, primarily because of pass-through entity tax (PTET) receipts. Net sales and use tax increased 0.1% through May 2, while transfers from the general fund to the school infrastructure fund — which are tied to sales tax collections — were down about 1% year to date.
Richardson highlighted two month-to-month adjustments that worsened the year-to-date picture since the agency's April memo. First, a drop in pass-through entity tax receipts collected in FY2025 compared with FY2024 during the same dates reduced FY2025 receipts by about $104 million. Second, the memo shows net individual income tax fell by $22 million over the last month, mainly because refunds were higher and wage withholding to the general fund decreased by $98 million.
Other month-to-month changes included an $18 million decrease in corporate income tax and an $11 million decrease in franchise tax. Those declines were partly offset by a $65 million increase attributed to fewer corporate refunds in FY2025 compared with FY2024.
Richardson also noted that previously enacted tax rate reductions — including an individual income tax rate change to a flat 3.8% effective Jan. 1, 2025 — are expected to weigh on the pace of general fund growth for the remainder of FY2025 and beyond.
On timing, Richardson said routine tax processing and refund issuance for timely filed 2024 returns should be complete in the following month and that those transactions will provide additional insight into FY2025 revenue performance. The agency plans to publish its next monthly video memo in early June.
