(The Center Square) – Tax cuts approved by the Iowa Legislature in 2022 slowed the accumulation of general fund revenue but did not put a huge dent in estimated general fund revenues, a committee said Wednesday.
The cuts would return $561 million to the taxpayers, but the revenue reduction for fiscal year 2024 is less than that amount, said Kraig Paulsen, chairman of the Revenue Estimating Conference and director of the Iowa Department of Management.
“To me this indicates continued organic growth within Iowa’s economy,” Paulsen said.
No fiscal year 2024 adjustments should be needed by the governor or the legislature, he said.
More tax cuts take effect Jan. 1, 2024. The income tax rate will be reduced from 6% to 5.7%, the inheritance tax from 4% to 2%, the corporate tax from 8.4% to 7.1% and the franchise tax from 4.7% to 4.4%.
The cuts are included in the Legislative Services Agency estimates. The general fund revenue for Iowa is projected at $9.6 billion for fiscal year 2025.
Paulsen and David Underwood, retired CFO and treasurer for AADG, Inc. said recession fears may not be as threatening as first believed.
“It seemed like finally everybody decided, ‘It hadn’t got here yet so maybe we won’t have one,’ at least in the near term,” Underwood said. “Maybe we just don’t’ need to talk about it as we have in the past.”
In Iowa, consumer sentiment seems high enough to support the economy, Underwood said. Iowa appears to go into recessions later than the rest of the country and is slower to come out of it, he said.
“(The) inflation rate has eased in certain areas to support more of a normal and stable, at least Iowa economy, again,” Underwood said.
The committee also discussed Iowa’s unemployment rate, which was up slightly to 3.2% from 2.9%.
“A continuing issue for Iowa is more jobs than workers and an aging workforce,” said Jennifer Acton, fiscal division director for the Legislative Services Agency and a committee member.
