Iowa tax revenues are outpacing projections made earlier this year, but that bounty is not necessarily an indication of a strong economy, according to a state legislative analyst.
“I don’t know if the economy is doing well,” Jeff Robinson, senior legislative analyst with the Iowa Legislative Services Agency, told The Center Square. “... There were a lot of moving parts in making this year’s estimates.”
The Iowa Revenue Estimating Conference made its estimate for fiscal year 2019, which ends on June 30, on March 15. The prediction was for a fiscal-year total of $7.6 billion in tax revenues, 4.8 percent higher than the revenue level in the previous fiscal year.
But year-to-date state general fund revenues through the end of May were 7.8 percent higher than at the same time last year, according to a recent monthly report by the Legislative Services Agency, which serves the state legislature.
That amounts to more than half a billion dollars above the revenues taken in by the end of May 2018.
“It does appear we’ll end up above projections,” Robinson said, but he added that the numbers may be the result of an underestimate of revenues stemming from the complications of the federal income tax reforms approved in 2017.
Those reforms took effect last year and cut the amount of federal taxes Iowans pay, which in turn raises individuals’ net incomes. That income was subject to the state income tax and led to more revenues coming into state coffers this fiscal year, according to Robinson.
“There was a boost from federal that was hard to predict,” he said.
As of the end of May, individual income tax revenues were up 6.6 percent over the same period in 2018, according to the monthly report. And franchise tax revenues on businesses were up 42.3 percent, but revenues from the sales and use tax were less robust, up only 3.9 percent, the report states.
“It will be interesting to see if the sales and use tax meets projections,” Robinson said.
One surprise was that revenues from the tax that insurers pay on premiums are up 20 percent for reasons that are uncertain, he said.
Overall, though, 2019 is shaping up to be a good fiscal year, Robinson said.