Total net receipts YTD are 4.8% more than 2021, with growth in personal income tax, sales/use tax, and corporate income tax.

Iowa’s revenue report for December has been released and the data revealed net General Fund revenue for the month was $267.3 million (43.5%) above the December 2021 net revenue level. When broken down by the three largest sources (personal income tax, sales/use tax, and corporate income tax), revenue compared to December 2021 is detailed below (directly from the LSA Revenue Memo):

• Personal income tax receipts totaled $432.6 million, an increase of $204.9 million (90.0%) compared to December 2021.
• Sales/use tax receipts totaled $335.6 million, a decrease of $6 million (-1.8%) compared to December 2021.
• Corporate Income Tax receipts received in December 2022 totaled $129.7 million, a decrease of $0.4 million (-0.3%) compared to December 2021.

Since month-to-month comparisons can be volatile, it may be even more important to consider year-to-date information, as well.  Total net receipts YTD are 4.8% more than 2021, with growth in personal income tax, sales/use tax, and corporate income tax.

As the calendar turns over to 2023, some tax categories are predicted to bring in less revenue than last year due to multiple pieces of legislation passed during the 2022 legislative session, including the historic tax cuts. The State Revenue Estimating Conference (REC) met on December 14, 2022, to evaluate the current (FY23) and next (FY24) fiscal years. December REC meetings are noteworthy because this projection establishes limits that must be followed by both the Governor and by the Legislature in developing the State’s budget.

Given those legislative changes, the REC’s most recent projection forecasts a revenue decrease of -1.9%.  The year-to-date figures for the first six months of this fiscal year are below (directly from the LSA Revenue Memo), along with the December REC forecast:

• The FY 2023 REC personal income tax estimate represents a projected decrease of 3.5% compared to actual FY 2022. Through December 2022, personal income tax receipts increased 9.2%.
• The REC estimate for FY 2023 sales/use tax receipts is a projected increase of 3.4% compared to actual FY 2022. Through December 2022, sales/use tax receipts increased 0.8%.
• The REC estimate for FY 2023 corporate income tax revenue is a projected increase of 3.6% compared to actual FY 2022. Through December 2022, corporate income tax receipts increased 7.7%.

Large sums of revenue are historically received in January, which will provide an even better understanding of the state’s revenue trend.  The next revenue memo will give us a look at how the tax reforms are beginning to impact revenue as January 1 was the implementation date of many of the new tax changes. The personal income tax now only has four brackets with a top rate of 6 percent and retirement income is exempt. The corporate income tax saw a rate drop from 9.8 percent to 8.4 percent and the sales tax has new exemptions.

The following chart further illustrates total General Fund revenues on a month-to-month basis.