DES MOINES – Tax refunds enacted last year are starting to impact state revenue collections.
State lawmakers passed and Gov. Terry Branstad signed tax changes that return a share of the state’s surplus to current filers with a state income tax liability and doubles the earned income tax credit claimed by Iowa’s working poor families.
Iowans filing early state income tax returns are getting a $54 credit on a single return and $108 per household, while taxpayers in lowering income brackets are eligible for an earned income tax credit that went from 7 percent to 14 percent of the federal credit.
More than $216 million in tax refunds were issued last month, an increase of $53.1 million over February 2013, according to the monthly revenue report issued by the Legislative Services Agency. For the first eight months of fiscal 2014, tax refunds had a $93.4 million impact on state revenues which contributed to a 7.3 percent drop last month and a 2.0 percent decline for the period from July through February compared to the previous fiscal year.
Both state personal income tax and sales/use collections were good in February, up 6.4 percent and 4.8 percent respectively, according to the LSA report, but weakness in other categories and the spike in tax refunds have held overall state tax collections $84.5 million below the $4.276 billion taken in for the first eight months of fiscal 2013.
However, LSA tax analyst Jeff Robinson said this fiscal year’s tax collections are being compared to receipts in fiscal 2013 that were inflated by federal tax issues from December through May. The comparisons have resulted in a downward trend line in state receipts for the past nine months. Also, gambling tax and real estate transfer tax deposits have decreased recently, indicating some drop attributed to weather issues.
The year-to-date decline by 2 percent in state receipts is still above the negative 2.7 percent yearly projection set by the Iowa Revenue Estimating Conference, but Robinson noted that volatility tied to the higher tax refunds will continue into May and it would be up to the three-member REC to decide later this month whether to revise its fiscal 2014 estimate.
“Things are up in the air more than normal,” he said. Robinson said the current year’s revenue report is mixed, given that sales and use tax receipts are performing well at 3.9 percent through February while personal income tax collections – the largest tax category – are 0.8 percent above the previous year but still about 2 percent above the REC projection.
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