Iowa revenue forecasters said on Friday the state was in a strong financial position, and the interim state budget director believes the state is providing enough money to allow for more tax cuts .
The state ended fiscal 2021 with an additional $ 1.24 billion, the largest surplus in Iowa history. State revenue increased by $ 870 million or 11 percent compared to the previous year.
“This growth reflects positive consumer confidence in the form of pent-up demand for goods and services, an improving economy and massive federal assistance in the form of stimulus payments, child tax credits.” , extended unemployment benefits and the paycheck protection program. ” said Holly Lyons, director of the non-partisan Legislative Services Agency’s tax division.
She said federal pandemic relief programs have likely given a “huge boost” to the money the state receives from Iowans who pay personal income taxes and sales taxes.
“The question is, what happens when the impact of this stimulus money wears off? Lyon asked.
She said that overall, Iowa is in a strong position with a budget surplus and full reserves, even with some headwinds facing the global economy.
The Revenue Estimates conference predicts that government revenue will continue to grow, but at a slower pace. They estimate that government revenue will increase by 1.5% in the current fiscal year and by 1.6% in the next fiscal year.
The estimates include a reduction in state revenue that will occur when the tax cuts approved earlier this year take effect in 2023.
Kraig Paulsen was recently appointed by Republican Gov. Kim Reynolds to be the interim director of the Iowa Department of Management. He is also director of the Iowa Department of Revenue and past president of Iowa House.
“There is a lot of conflicting information to look at at the macro level,” Paulsen said, highlighting wage growth, supply chain issues, issues around inflation, productivity gains and a turnout. labor market below pre-pandemic levels. “But I have yet to conclude that with a reasonable degree of confidence, we should expect continued growth in the Iowa economy and the state revenues it generates.”
Asked about the potential effect of a cut in federal aid, Paulsen said the stimulus packages were having “some impact”, but he said there had been economic growth “outside of that as well. “.
“My confidence is high enough that we will continue to have strong growth,” Paulsen said. “And again, I mean, it’s up to the elected leadership. But my recommendation would be that there be absolutely significant income growth going on, which provides an opportunity to lower income taxes.
Republican leaders attribute the budget surplus to their budgeting and pandemic response policies.
“It also reaffirms the need to cut taxes and pay back excess taxpayer dollars,” Reynolds said in a statement. “I will work with my team and legislative leaders to bring forward legislation that builds on our previous historic tax cuts and continue to return the Iowans to their hard-earned money while ensuring our state’s prosperity and growth.”
Democrats highlighted Lyon’s statement that federal aid programs were a major driver of Iowa’s economic recovery.
“The key question is, will Governor Reynolds and Republican lawmakers address the root causes of our labor shortage? attract and keep families here? Asked Representative Chris Hall, D-Sioux City, the top Democrat on the House budgeting committee.
He said working families see the impact of democratic tax policies like the expansion of the child tax credit at the federal level.
“Any tax changes made in the next session must target middle class families, not just the wealthy and special interests,” Hall said.