A state panel is predicting state tax collections for this budgeting year will fall 2.7% below the last one.

Iowa Department of Revenue director Kraig Paulsen said tax cuts for retirees, corporations and individuals in the top state tax bracket are what’s driving that negative number.

“Definitely not pessimistic,” said Paulsen, who’s chairman of the Revenue Estimating Conference. “I’m not pessimistic about what’s coming at all, but it is somewhat conservative.”

David Underwood, a CPA from Clear Lake who is another member of the Revenue Estimating Conference, said he’s heard from employers who have “just about given up” on trying to find employees and that is limiting business growth in Iowa.

“The other thing with it is that the wage increases are just about to the levels of where we’re not going to see (that) wage growth going forward,” Underwood said. “I mean I’ve talked to a number of people who say: ‘I just can’t pay anymore. You know the profits aren’t there to support that.'”

Holly Lyons, fiscal services division director of the Legislative Services Agency, said while there are national economic headwinds, major indicators offer conflicting data, “suggesting that the economy’s not in a recession, but merely in a period of slower growth as it transitions from the rapid recovery from the brief, but harsh pandemic-induced recession.”

Underwood agreed that the state recovered “quite rapidly” from the economic freefall COVID caused in 2020, “but nobody has figured out how to continue that growth level and that’s what worries me about the growth levels that we’re going to see in employment and profitability in Iowa.”

Underwood told Lyons and Paulsen he wished he had “a more optimistic view” of the state’s economy.

“It’s good in Iowa, but how long is it going to be good?” Underwood said. “And I know our leading indicators in Iowa don’t show the recession eminent in Iowa, but there’s a difference between a recession and just a slowness or a halt to our growth.”

The last state fiscal year ended June 30 and state tax collections grew 11.4% during the 12 month period — far beyond officials’ predictions.

Iowa’s gross domestic product declined slightly in March, April and May. The governor’s top tax and budget advisor said that and other economic measures indicate the economy’s boom cycle “has slowed,” but is still in positive territory.

Radio Iowa