Iowa is expected to receive less money this fiscal year than last year, and the same amount in 2024, the state proposed Wednesday.

The decrease in revenue is due to a major tax cut signed into law by Gov. Kim Reynolds earlier this year, which will lower Iowans’ taxes for several years. One of the biggest changes to the state revenue law is the abolition of the tax on pension income starting in January.

More:Now is the time Iowans can expect to see tax cuts in new legislation signed by Kim Reynolds

Reynolds, a Republican, said the financial projections show Iowa is “adjusting the state’s collection of taxpayer dollars.”

“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 reduction in the state revenue,” Reynolds said in a statement. “However, our state budget remains strong, and we continue to invest in priorities that benefit all Iowans.”

The fiscal projections come from Iowa’s three-member Revenue Estimates Conference, which meets three times a year to estimate how much the state is expected to collect.

In fiscal year 2023, which began on July 1, Iowa expects to receive $9.62 billion in revenue, down 1.9% from fiscal year 2022, when it received $9.80 billion. Iowa is a billion. In fiscal year 2024, the state is estimated to receive $9.63 billion.

Democrats criticized the stagnant numbers.

“Today’s no-growth revenue estimate is another warning for Iowa’s economy,” state Sen. Janet Petersen, D-Des Moines, said in a statement. “Funds projected for 2023 and 2024 are lower than in 2022, and job creation in Iowa continues to lag behind our neighbors. Democratic Senators are committed to passing a balanced budget that protects taxpayers taxes and Iowa public schools.”

The new estimates come on the heels of a period of rapid growth that saw Iowa’s income grow 11% and then another 11.4% over the previous two years.

Reynolds will have to use the new revenue projections when crafting his budget proposal to the Iowa Legislature in January. By law, Iowa’s state budget cannot exceed 99% of annual revenue.

In the current financial year, the state budget spent 8.2 billion dollars, which is equal to 91% of the revenue of 9 billion dollars in its hands.

Iowa closed the books last fiscal year with a $1.9 billion surplus.

The tax cuts signed by Reynolds this year are expected to reduce state revenue by $1.9 billion when fully implemented, according to the nonpartisan service agency.

Starting in January, Iowans in the highest bracket — those making $75,000 or more — will see their income tax rate drop to 6%. The tax rate on all taxes will gradually decrease until everyone pays a tax rate of 3.9% in 2026.

Reynolds and legislative Republicans, who control the majority in the Iowa Senate, said they plan to consider further tax cuts when lawmakers return to Des Moines on the 9 January.

At the federal level, high inflation and related interest rates are increasing the Federal Reserve to alleviate that inflation has caused fears of a recession. But Iowa’s economic indicators show no signs of slowing, say members of the Conference on Revenue Estimating.

“I still expect any recession and, at least in Iowa, it will be shallow and short,” said Kraig Paulsen, director of the Iowa Department of Revenue.

Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at or by phone at 515-284-8169. Follow him on Twitter at @sgrubermiller.

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