State tax collections took a double-digit dip in December, an unexpected drop that may be of concern if the trend persists into the new calendar year, state officials said Friday.
Overall state tax receipts fell by 17.4 percent last month compared to December 2012, a $98.3 million decline that may be related to timing issues and federal tax implications for individuals or corporations in Iowa who can deduct their federal tax liability from their 2013 state taxes, said Jeff Robinson, a tax analyst for the Legislative Services Agency.
“A lot of things happened in December, and none of them were good,” Robinson said.
December’s revenue decline put year-to-date collections for the first half of the 2014 fiscal year in the negative column. The $48.3 million decline in state collections from July through December marked a 1.5 percent drop, but was still better than the 2.7 percent yearly decrease the state’s Revenue Estimating Conference has projected for fiscal 2014.
Robinson said the fiscal 2014 tax collections are “still playing out as expected, but it’s a little worse than I thought it would be.”
State lawmakers last session made changes that shifted some state proceeds from cigarette/tobacco taxes and gaming revenue outside of the general fund with a combined effect that essentially erased gains in other tax collection areas. The state also has seen a spike in refunds for state corporate income taxes and other categories that also have affected the bottom line in the LSA monthly state tax reporting.
For the first six months of the current fiscal year, personal income tax collections remain up 1.7 percent and sales/use tax receipts are 3.4 percent ahead of last year but both columns posted losses last month – a 10 percent decline in personal income taxes and a 3.3 percent drop in sales and use tax collections.
Robinson called those trends “worrisome,” but added that “hopefully, it’s a timing issue.”