By O. Kay Henderson (Radio Iowa)
The panel that meets quarterly to estimate state tax revenue predicts consumer spending will drive state tax collections a bit higher this year, but total revenue will still fall by over a billion dollars due to income tax cuts that took effect January 1.
Jennifer Acton, head of the Legislative Service Agency’s Fiscal Division, Is a member of the State Revenue Estimating Conference. “The current economic picture for Iowa remains mixed with state and national economic indicators presenting conflicting signals and limited federal data since October’s meeting, some caution is due,” Acton said. “However, it is also noted that total gross receipts growth has marginally increased over the last eight weeks.”
Acton said persistent inflation continues to challenge consumers and businesses, while some tariff impacts have been delayed as large and small businesses boosted inventory at this time last year to try to avoid tariffs. “While Iowa continues to face unique challenges in its agricultural and manufacturing sectors, there has been some good news recently,” Acton said. “China has begun purchasing American soybeans again after a pause, although exports are still not at levels of prior years. In addition, the price of soybeans has risen by over a dollar a bushel since mid-October and corn prices have also increased since mid-October as well.”
Iowa Department of Management Director Kraig Paulsen, the governor’s top budget advisor, said uncertainty at the federal level makes predicting state tax revenue gains and losses difficult. “The federal government shutdown did cause a delay in publishing of some economic data and the international trade policy continues to be unsettled,” Paulsen said. “That said, the announcement of the $12 billion in relief payments to farmers will substantially help the agriculture sector and, in turn, Iowa’s economy.”
Paulsen said the state has more than enough cash in reserve accounts to cover the drop in state income tax collections. Income taxes from individuals and corporations account for the largest share of state tax revenue, but Paulsen said there’s growth in the state sales taxes despite surveys indicating consumers intend to spend less this holiday season. “There’s conflicting information, but the receipts continue to be strong into the state,” Paulsen said.
Senator Janet Petersen, the top Democrat on the Iowa Senate’s budget committee, issued a written statement after this morning’s Revenue Estimating Conference meeting. Petersen said no matter how Governor Reynolds and her fellow Republicans “try to spin it,” the State of Iowa “faces a historic, billion-dollar state budget deficit” due to tax cuts.
