Overall state tax receipts in February were down 7. 3 percent compared to February of 2013. Jeff Robinson, a senior fiscal analyst for the Legislative Services Agency, says the drop was driven by a dramatic increase in state income tax refunds.
“Income tax refunds for February totaled $206.8 million, the largest single income tax refund month in Iowa history,” Robinson says, “eclipsing the $183.7 million posted in April of 2013.”
While Robinson calls this a “noteworthy negative” for the state’s overall financial picture, it’s not a surprise.
“Two legislative changes enacted last year will provide net revenue drag this tax return season,” Robinson says. “The first is the increase in the Iowa Earned Income Tax Credit, moving from seven percent of the federal credit amount last year to 14 percent this year…Income tax returns with Earned Income Tax Credit claims tend to get filed early, so the bulk of this impact should be expected in the early part of the tax return season.”
There’s also a new “Taxpayer Trust Fund” tax credit, worth $54 for a single Iowa taxpayers and $108 for a couple. Robinson says that will reduce overall state tax collections by a total of $81 million.