Iowa budget panel: Tax cuts reverse revenue growth next year
DES MOINES, Iowa (AP) — A state panel responsible for tracking Iowa revenue trends said Thursday that growth continues at a good pace but that tax changes signed by Gov. Kim Reynolds last week could reverse that trend beginning next year.
The Revenue Estimating Conference said state revenue will grow 4.3% this year, bringing in net receipts of $9.17 billion. For next year, however, the growth is expected to reverse as the Republican-crafted tax cuts kick in, resulting in tax revenue falling 0.2% to $9.16 billion.
The revenue decline is due to the estimated loss of $236 million in tax revenue. By 2024, that revenue decline is expected to reach $561 million, or a 2.1% drop to $8.96 billion.
The tax cut law phases in a 3.9% flat tax over four years, eliminates taxes on retirement income and lowers taxes for corporations at an estimated overall cost of about $2 billion in lower annual total state income when fully implemented.
A significant drop in state revenue could result in revenue shortfalls and budget cuts. Democrats and some economists have warned of possible cuts to state services and argued the tax reductions mainly helped corporations and wealthy people while doing little for average residents.
“Every tax dollar Republican politicians hand over to corporations and millionaires costs Iowa families and puts the futures of more Iowa kids at risk,” said Democratic Rep. Jo Oldson, ranking member of the House Appropriations Committee.
Senate Republican Leader Jack Whitver said Iowa remains in a strong financial position with reserve accounts full and $2 billion in a taxpayer trust fund that can be tapped if revenue falls.
“The tax relief bill is sustainable, the budget is balanced, and Iowa is on the right track,” he said.
Iowa Department of Management Director Kraig Paulsen said while economic indicators point to strong economic growth in the state this year and next year, there is greater risk for a slower economy and weakening state revenue in 2024. However, Paulsen said he doesn’t expect “an economic contraction.”