Iowa Republicans have worked to pass a number of tax cuts aimed at reducing corporate and individual income taxes. A projection of those cuts has Iowa's taxes not bringing in enough money to cover current expenses.
The impact of Republican tax slashing is on the horizon as projections for state tax cuts dip below current state spending.
The state is spending more money than it will be taking in under future tax cuts. Under Gov. Kim Reynolds’ leadership, the Iowa Legislature has cut income tax rates for individuals and corporations. Those cuts began taking effect in January of this year.
The Revenue Estimating Conference published a projection Thursday of the state’s future tax revenue based on an analysis by a nonpartisan panel that estimates future tax revenues.
The projection of fiscal year 2026—which doesn’t start until next July 2025—had Iowa’s revenue sitting at $8.7 billion. Nearly 90% of those receipts come from personal income and sales taxes. Less than 9% of Iowa’s tax revenue comes from corporations. For Iowa’s current state fiscal year, spending sits at $8.9 billion.
That’s a $200 million difference.
Currently, many state legislators are in the middle of reelection campaigns. But come next spring, the body will be tasked with balancing a budget. The Legislature will have to find a place to cut or a source of money to plug the hole. This could be from unspent funding or from the $3.7 billion Taxpayer Relief Fund.
“That means Iowans get to keep more of what they earn, and that’s how it should be,” Reynolds said in a statement. “Our state’s fiscal health remains strong, and Iowa’s economy continues to grow.”
Sen. Janet Petersen, D-Des Moines, said that while revenues are down, income caps on the private school voucher program are set to expire next year, opening the program to all students.
“Republican lawmakers’ and Gov. Reynolds’ priorities put private school vouchers and corporate tax giveaways ahead of our kids in public schools, seniors in nursing homes, and tax relief for working families,” Petersen said in a statement. “Their private school voucher scheme is growing, and the state’s revenues are declining. That’s not a winning combination.”
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