Iowa will bring in less state revenue this fiscal year than last year as Republican-backed tax cuts take effect in January, according to the General Assembly. about income.

The panel estimated Wednesday that Iowa will see a 1.9% drop in state revenue this fiscal year, which ends June 30, 2023.

Director of the Department of Administration Kraig Paulsen said that this is mainly due to the elimination of the state tax on retirement income, which begins on January 1st.

The top personal income tax rate will drop from 8.53% to 6% on January 1, and the top corporate tax rate will drop from 9.8% to 8.4%. All these tax changes put together are expected to lead to a decrease in government revenue. In general, it is expected that the government’s income will increase every year.

Republican Gov. Kim Reynolds said in a statement Wednesday that the reduction in state revenue through the tax cuts was intentional.

“The REC forecast for December confirms that we are achieving our goal of reforming the state’s collection of taxpayer dollars and returning it to hard-working Iowans,” Reynolds said. “The historic tax cuts I signed into law earlier this year will go into effect in a few weeks, and as planned and expected, projections show a slight decrease in revenue. of the state. However, our state budget remains strong, and we continue to invest in priorities that benefit all Iowans. “

Next fiscal year, revenue forecasters predict that revenue will be the same as this year.

The personal income tax rate will decrease each year until 2026, and the top corporate tax rate will also decrease over time. The cuts are expected to cost the state nearly $2 billion when fully completed in 2026.

Most Democratic lawmakers opposed the tax cuts, saying the state’s declining revenue is a warning sign for Iowa’s economy.

“Thanks to last session’s tax cuts to Iowa’s biggest corporations and their millionaires, Iowans will have fewer services to rely on this year,” said Rep. Timi Brown-Powers, D-Waterloo. “Every dollar Republican politicians give to corporations and millionaires puts Iowa families, public schools and our children at risk.”

The panel’s December forecast is used by the governor to draft a state budget for consideration in the upcoming legislative session.

This estimate gives Reynolds about $9.5 billion to work with. But over the past two years, Reynolds and the Republican-led legislature have spent far more than that on public services, leaving a huge surplus.

Paulsen, who represents Reynolds on the revenue forecast panel, also said the state is still “collecting” money from Iowans. He said that MPs have enough money to cut taxes more if they want to.

“I have no qualms about meeting the government’s obligations and meeting the government’s spending priorities,” Paulsen said.

Reynolds is expected to release his budget proposal on Jan. 10.

Panel members said there are no signs of an economic downturn in Iowa

Members of the revenue conference said Wednesday that there are no signs of a recession in Iowa yet. However, they said that the current economic situation makes it very difficult to predict what will happen.

“Although there are no signs of a recession in the future, many economists indicate that the 2023 economy may have a difficult time,” said Jennifer Acton, who represents the legislative services agency. on the panel.

Acton and Paulsen said Wednesday that Iowa’s key economic indicators remain strong and do not suggest a recession at this time. On Thursday, Iowa Workforce Development announced Iowa’s unemployment rate increased to 3.1% in November.

Paulsen said if there is a recession next year, Iowa State is in a good financial position to weather it.

“Overall, the state is in a very strong fiscal position, and well-positioned to manage any future circumstances,” Paulsen said. “I still expect that any recession will be worse, and at least in Iowa it will be shallow and short in length.”

Paulsen said that historically, Iowa’s economic highs and lows have been quiet compared to the rest of the country.

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