Iowa general fund receipts down $374 million through Feb. 3 as tax-law shifts cut income collections

Eric Richardson, senior fiscal analyst at the Legislative Services Agency, reported in the agency's January 2026 video memo that Iowa's net general fund receipts decreased by $374,000,000, a 7.7% decline, through Feb. 3, 2026.

Richardson said the drop reflects a mix of tax-law changes and changes in refund patterns. "Through February 3, net general fund receipts decreased by negative $374,000,000 and minus 7.7%," he stated in the memo. Only one of the three main general-fund revenue sources increased: sales and use tax, which rose 6.9%. Individual income tax collections fell 14.8% and corporate income tax fell 32.7% over the same period.

The memo links part of the decline to statutory tax-rate changes enacted in 2024. According to Richardson, "2024 Iowa Act, Senate File 2442, the individual income tax rate act, lowered the individual income tax top rate from 5.7% to a flat 3.8% as of 01/01/2025." He added that income-tax withholding declined about 20.5% on a cashier basis so far in FY 2026.

Richardson also separated gross receipts from refunds in assessing revenue strength: gross revenues through Feb. 3 were down 9.5%, but net revenues appeared stronger because regular refunds fell 37.9% compared with the prior year. He attributed the refund decline primarily to "fewer pass through energy tax credits being redeemed in FY 2026 compared to FY 2025." The memo notes school infrastructure transfers increased 4.9% over the period.

On month-to-month calculation, Richardson said growth through Feb. 3 was $64 million lower than the comparable calculation through Jan. 2. He traced that difference to an $86.5 million decline in gross individual income tax receipts, partially offset by a $31.8 million gain in gross sales and use tax.

The memo places the year-to-date decline in the context of the state's forecast: Richardson said the −7.7% growth through Feb. 3 remains above the −8.8% decline the Revenue Estimating Conference projected for the full fiscal year. He also warned that additional enacted rate reductions — to the franchise tax, inheritance tax and insurance premium tax — would continue to weigh on net revenue growth as FY 2026 returns are processed.

Richardson concluded that individual income receipts "should begin to stabilize beginning into February 2026 as the flat income tax rates are now equal for both tax years 2025 and 2026," and closed by noting the next monthly video memo will appear in early March.

The memo is a staff update: it provides data and analysis but does not record any formal action or recommendation by the Legislature or the Revenue Estimating Conference.