“Boom” times in state tax collections.
The state fiscal year ended June 30 and the Legislative Services Agency reports state tax revenue grew 8.7 percent over the past 12 months.
“This is truly a boom,” says Jeff Robinson, a senior analyst for the Legislative Services Agency. “It is driven, to some extent, by federal tax changes that will not occur next year, so therefore the 8.7 percent growth — some of that is, for sure, a one-time boost.”
Federal tax changes caused Iowans who earn dividends and capital gains to adjust how they get the income from their investments, meaning a windfall for the state in terms of tax collections. But Robinson says despite that windfall, the past 12 months have shown the state’s economy has bounced back from the recession.
“To grow 8.7 percent in a year after a year that your grew 6.7 percent, which was the previous year — we have gotten away from the depths of the recession,” Robinson says.
More than $4 billion of the $6 billion in state tax collections came from income taxes over the past 12 months — a 12.4 percent increase in income taxes compared to the previous year. However, sales tax collections were not as robust.
“Sales tax was positive for the year, but it wasn’t particularly the strong number,” Robinson says. “It finished 1.7-1.8 percent up, year over year, which is good, but it’s not a great year. Sales tax in a really good year will grow four percent or more, so that tells us that expenditures on things that are taxed were not as robust as the overall General Fund revenue growth.”
Corporate income tax payments to the state have been “really strong” for the past two years, but did seem to “peak” in November according to Robinson.
“It hasn’t come down all that much, but it’s shown us that, cyclically, maybe we’ve stopped seeing the rapid growth in tax receipts that we had been enjoying,” Robinson says.
State tax collections for the month of June were down “just slightly,” by $2.5 million — a decrease of less than half a percent compared to June of 2012. The last two days of June were on a weekend and Robinson says there were likely sales tax transactions that happened in June that won’t be deposited until July — and therefore reflected in the July report on state tax revenue.