Iowa general fund revenues fall $742 million year to date; pass‑through tax and withholding drive shortfall

Eric Richardson, senior fiscal analyst at the nonpartisan Iowa Legislative Services Agency, said in a May 20, 2025 video memo that Iowa’s net general fund revenue through transactions processed on June 3, 2025 fell $742,000,000 on a fiscal‑year basis, a 9% year‑to‑date decline.

Richardson said much of the decline—$729,000,000—was tied to a decrease in net insurance and other taxes resulting from a drop in pass‑through entity tax (PTET) activity. “Revenue was decreased $742,000,000 on a fiscal year basis or minus 9% year to date,” Richardson said. He noted that PTET was introduced retroactively to tax year 2022 during FY2024.

The Legislative Services Agency memo separates gross receipts from refunds and finds gross revenues through June 3 were down 7.3%, while an increase of 0.7% in refunds pushed the net decline to 9%. Richardson pointed out a 477.6% rise in PTET‑related refunds in FY2025 as one contributing factor.

The memo also flagged short‑term movements since the May 2 snapshot: individual income tax payments fell by $73,000,000 while individual income tax refunds decreased $124,000,000, producing net positive growth for individual income tax in that narrow window. Sales and use tax deposits rose by $29,000,000 over the same interval, but the memo said transfers from the general fund to the school infrastructure fund remained weaker—sales tax deposits were up 0.9% year to date while transfers to the school infrastructure fund were down 0.7%.

Richardson said the most recent Revenue Estimating Conference estimate for total net receipt growth in FY2025 (excluding transfers) is negative 6.1%, a projection the year‑to‑date figures remain below. He added that while FY2025 looks weak when compared with the unusually strong FY2022, the current year is not as weak compared with several other recent years; reallocations and PTET processing explain only about $20,000,000 of the $742,000,000 decline.

The memo noted that payments associated with the current tax year since early February account for $264,000,000 of the overall reduction. Richardson also described the effect of recent tax law changes, saying income tax rates for tax year 2025 dropped to a flat 3.8% effective Jan. 1, 2025, a change reflected in withholding and estimated payments.

Richardson closed by saying the recent income tax reductions and the PTET processing effects will continue to influence general fund receipts through the end of FY2025 and into FY2026. The Legislative Services Agency said it will publish the next monthly video memo in early July.