A state panel is predicting state tax revenue will fall nine percent during the current state budget year compared to the 12-month period that ended June 30th. The group met Thursday and reduced the tax estimate it released in March by another 375 million dollars — citing factors like Iowa’s rising unemployment rate, falling soybean prices and the state income tax cut that took effect in January. Kraig Paulsen, the governor’s budget director, serves on the panel. He says Republican lawmakers who passed the tax cuts planned for this, socking away six billion dollars’ worth of taxes over the past several years that can be spent to balance the state budget.
Recent federal tax reductions are having an impact, too, since Iowa tax policies automatically adjust to mirror federal changes. Jennifer Acton, fiscal division director for the Legislative Services Agency, says declining consumer confidence could be concerning if these trends continue.
Former State Banking Superintendent Jeff Plagge says there are some worrisome signals in the ag economy.
Plagge and the other two panelists on the State Revenue Estimating Conference predict Iowa tax revenue will stabilize and begin to grow in 2027 — if there’s no recession. Governor Reynolds says now that Iowa’s three-point-eight-percent flat income tax is fully implemented, Iowans have more of their own money than they did at this time last year — and that’s just as it should be. Democrats like Representative Dave Jacoby of Coralville say the state’s finances are plummeting.
Senator Janet Petersen of Des Moines says the tax cuts have created a billion-dollar hole in the state budget and state reserves will eventually run out.
Petersen is the top-ranking Democrat on the Senate Appropriations Committee.
