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Iowa general fund receipts down through Dec. 3 as tax law changes and PTET reallocations shift revenue mix
Summary
Eric Richardson of the nonpartisan Iowa Legislative Services Agency reported that through Dec. 3 fiscal-year-to-date net general fund receipts fell $55 million (1.8%), with individual income tax up $233 million and corporate income tax down $103 million, driven in part by pass-through entity tax reallocations and impending statutory rate cuts.
Eric Richardson, senior fiscal analyst for the Iowa Legislative Services Agency, said in a November 2024 video memo that Iowa's net general fund receipts for fiscal year 2025 through Dec. 3 decreased $55 million, or about 1.8%.
Richardson said the November memo covered revenue through Dec. 3 because changes in Department of Revenue processing and 2022 changes in sales-tax due dates can make month-end accounting incomplete. "This November video memo will discuss Iowa net general fund revenue for fiscal year 2025 through December 3rd," he said.
Why it matters: the revenue picture affects the state's ability to meet budget projections and informs the Revenue Estimating Conference's December meeting. Richardson noted that gross receipts are up slightly while refunds have increased, and that transfers to the school infrastructure fund have fallen.
Key numbers and drivers - Net general fund receipts: down $55 million (1.8%) year to date through Dec. 3. Richardson attributed the timing window for the report to recent deposit- and due-date processing changes at the Iowa Department of Revenue. - Individual income tax: up $233 million (18.3%). Richardson said part of this increase reflects pass-through entity tax (PTET) reallocations as tax-credit claims are processed by the Department of Revenue. - Sales and use tax: up $33 million (3%). - Corporate income tax: down $103 million (33.8%). - "Other taxes": down $215 million (93%) compared with the prior year; Richardson tied this decline to the implementation of the PTET under 2023 legislation (House File 352), which was applied retroactively to Jan. 1, 2022, and to subsequent tax-credit offsets.
Richardson separated gross receipts from net totals. "Gross revenues through December 3rd are up 0.3%, but total net revenue growth comes in lower than gross due to a 32% increase in regular tax refunds along with a 5.6% decrease in sales tax transfers out of the general fund to the school infrastructure fund," he said.
Projection context and upcoming review Richardson compared current year-to-date performance with the Revenue Estimating Conference's October 2024 projection, which had a fiscal-year growth rate of negative 5.3%. He reminded viewers that the revenue estimating conference will reconvene on Dec. 12, 2024, to evaluate and project general fund revenue for fiscal years 2025 and 2026.
Tax law changes noted Richardson summarized tax changes that take effect Jan. 1, 2025: Iowa's top individual income tax rate will fall from 5.7% to a flat 3.8%; the insurance premium tax rate will decrease from 0.95% to 0.925%; the inheritance tax will be eliminated (reduced from 2% to 0%); and the franchise tax will decrease from 4.4% to 4.1%. He said those changes are reflected in expectations discussed by the Revenue Estimating Conference.
What was not decided or changed at this memo The video memo presented analysis and figures; it did not record any formal votes or administrative actions. Richardson announced the Revenue Estimating Conference's next meeting date but did not report any formal adjustments taken at that time.
Ending note Richardson closed by thanking viewers and noting the next monthly video memo would appear in early January.
