A state panel said Thursday that Iowa’s economy continues to perform well with record tax receipts for the fiscal year that ended in June, but tax policies enacted by lawmakers will slow the revenue growth in the coming years.
Iowa closed fiscal year 2022 with revenue growth of more than $1 billion, or 11% more revenue than the previous year.
For the current fiscal year, the Revenue Estimating Conference estimates state revenue will fall 2.7% to $9.53 billion due to the loss of about $575 million in revenue from tax cuts the legislature enacted.
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For next year, revenue is expected to come in at $9.59 billion, which accounts for a reduction of about $450 million from tax cuts policy. That would be a slight increase of 0.6% from the 2023 revenue.
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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.
The three-member panel attributed the significant increase in revenue for 2022 to increased employment and wage growth, leading to higher income tax revenue, and more consumer spending that spurred higher sales tax income.
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The group will meet again in December and agree to an estimate the governor and lawmakers must use as they craft a state budget.