(Radio Iowa) – The most recent accounting shows total state tax collections dropped 7.1% in the past 12 months.

According to the Legislative Services Agency’s Monthly Revenue Memo, much of that $629 million drop is due to a 77.8% decline in a “pass through entity” tax paid by the owners of Partnerships, S Corporations and Limited Liability Companies. In 2023, Iowa lawmakers created a new, refundable tax credit for the owners of these types of businesses. The tax break was retroactive to January 1st of 2022.

The state’s two main sources of tax revenue are sales taxes and the income taxes individuals and couples pay. Those payments increased, slightly, over the past 12 months. “Individual income tax increased 1% and sales and use tax increased 1.5% for the period,” LSA fiscal analyst Eric Richardson said, “while corporate income tax decreased 5.7%.”

This was the third consecutive fiscal year that state tax revenue dropped, a move Republican lawmakers say is expected due to tax cuts they’ve approved. A final report on tax collections for the state fiscal year that ended June 30, 2025, will be completed in mid-September. “As occurs every year, some tax payments for the month of June and earlier are not due until July or later and the fiscal year accounting books stay open to record the transactions for the correct fiscal year,” Richardson said, adding there may also be Iowa tax refunds issued in the next two months that should be subtracted from total state revenue for the previous fiscal year.

In March, the State Revenue Estimating Conference predicted total state revenue would fall 6.1% during state Fiscal Year 2025 due to state tax cuts approved in the past few years. Current accounting shows the drop was 7.1%.