Iowa's net general fund revenue has taken a significant hit, with a decrease of $170 million, or 10.6%, reported for cash fiscal year 2026 through September 4. This decline is primarily attributed to a drop in individual income taxes, which fell by $128 million, including a notable $109 million decrease in income tax withholding. The reduction in the individual income tax rate to a flat 3.8% that began on January 1, 2025, is expected to continue impacting revenue through fiscal year 2026, with stabilization anticipated in fiscal year 2027.

Corporate income tax has also seen a decrease of $24 million, contributing to the overall revenue downturn. Additionally, the suspense account, which tracks certain tax revenues, has decreased by $112 million compared to the previous fiscal year. This decline is partly due to the timing of tax due dates, which created a negative balance of $127 million in the suspense account for fiscal year 2026.

On a more positive note, sales and use tax deposits have increased by $29 million since July 1, and tax refunds have decreased by $69 million, which helps mitigate some of the revenue losses. As the state approaches the closure of fiscal year 2025, it is projected that gross general fund revenue will end approximately $110 million below estimates, largely due to a $561 million shortfall in individual income taxes.

The final accounting for fiscal year 2025 will be completed by the end of September, with adjustments expected for school infrastructure transfers and accrued revenue. The state anticipates that the final results will reflect a slight deficit compared to projections, emphasizing the need for careful monitoring of revenue trends moving forward.