Arkansas general revenue tax revenue for July exceeded the state’s forecast by $ 51.6 million, or 9.4%.
However, another look at revenue – by comparing last month’s revenue with what the state received in the same month a year ago – is skewed as the state has its individual income tax return and payment deadline from April 15, 2020 to the July 15, 2020, at the same time as the federal government postponed these deadlines during the coronavirus pandemic, the Ministry of Finance noted.
The state budget years start on July 1st and end on June 30th.
Last month’s total revenue was $ 166.5 million, or 21.7%, less than the state’s $ 600.3 million in the same month a year ago, the Department of Finance and Administration reported Tuesday in its monthly revenue report .
According to Whitney McLaughlin, tax analyst for the finance department, the largest total revenue collection in July is the $ 766.8 million received in fiscal 2020.
The state’s two largest general sources of income – individual income and sales and use taxes – both exceeded forecast for the month of July.
Governor Asa Hutchinson said July general revenues reflected a continued robust and growing economy in Arkansas.
John Shelnutt, the state’s chief economic forecaster, said the July report “shows a robust rebound at this point due to the combination of lagging sectors catching up and ongoing consumer spending and more travel than last year.”
Tax refunds and some special government expenses are deducted from total collection of general revenues, leaving a net amount that government agencies are allowed to spend.
Overall net sales for July decreased $ 151.1 million, or 22.7%, to $ 514.9 million from the same month last year, but exceeded forecast by $ 39.2 million, or 8.2%.
Hutchinson said it was encouraging to start the fiscal year with a net income of $ 39 million.
“This surplus is early in the year and could change from month to month, so it is important to continue a conservative approach to public finances,” the Republican governor said in a written statement.
Earlier this year, the Republican-dominated General Assembly and Hutchinson passed a general revenue budget for fiscal year 2022 totaling $ 5.849 billion, including an allocation of $ 17.1 million to the Restricted Reserve Fund.
The current general revenue forecast for fiscal year 2022 assumes that all categories of the Revenue Stabilization Act, which distributes the money to government-sponsored programs, will be fully funded, said Scott Hardin, finance spokesman.
Hutchinson has announced that it will convene a special session this fall in which the legislature will consider further lowering the highest individual tax rate of 5.9%.
A law passed in 2019 lowered the top rate on January 1, 2020 from 6.9% to 6.6% and on January 1, 2021 to 5.9%.
Bill Sample, R-Hot Springs, chairman of the Senate Revenue and Tax Committee, said legislative leaders are working to “smooth the cliffs” in the state’s individual income tax law and stopping the state maximum rate at the governor’s request 5.5% lower.
“Nothing is final and solid,” he said.
For fiscal 2021, the overall revenue budget was $ 5.899 billion, including an allocation of $ 76.2 million to the Restricted Reserve Fund and an allocation of $ 5.9 million to the Medicaid Trust Fund, and all Categories of the Revenue Stabilization Act were fully funded in 2021, Hardin said.
In fiscal 2021, Arkansas’s surplus hit a record total of $ 945.7 million, more than double the previous fiscal 2007 record of $ 409.3 million, according to Treasury records.
The Long Term Reserve Fund, which Hutchinson called the state’s savings account, was the main beneficiary of the surplus.
His balance is now $ 1.2 billion, Hardin said.
In order to withdraw money from the long-term reserve fund, the receiving fund must be supported by general income and the CFO must determine that no money from the reserve fund needs to be used for the educational adequacy of the public schools.
There are other restrictions, including no money can be sent if there is a “lack of revenue” as defined by the law and the reserve fund cannot be used for a fund for super economic development projects, Hardin said.
Collections in July
General receipts in July included:
– A decrease in individual tax collections of $ 198.1 million, or 45% year over year, to $ 241.7 million due to the shift in filing and payment deadlines from April 15, 2020 to July 15, 2020.
But last month’s individual tax surveys beat forecast by $ 27.9 million, or 13.1%.
Withholding tax is the largest category of individual income tax collection.
They were up $ 13.5 million, or 6.5 percent, from the same month last year to $ 220 million, beating forecast by $ 14.8 million. The 6.5% increase in withholding tax from July 2020 came as a surprise and reflects a pretty strong economic recovery in the state and more people working, Shelnutt said.
Individual tax collections from estimated payments decreased $ 28.3 million from the same month last year to $ 8.5 million, but exceeded forecast by $ 5.3 million.
Individual collections from returns and renewals declined $ 183.3 million from last year to $ 13.2 million, but topped forecast by $ 7.8 million.
Sales and use tax revenue increased $ 23.6 million, or 10%, from the same month last year to $ 260.1 million, beating forecast by $ 17.4 million, or 7.2%
The 10% increase in sales and use tax receipts from July 2020 reflects continued strong economic recovery in the state, Shelnutt said.
Tax collections from lodging and hospitality, including restaurants, increased $ 5.6 million, or 30%, year over year to $ 24.2 million, he said.
Retail tax collections rose approximately $ 3 million, or 3%, to $ 100.4 million from the same month last year, and vehicle sales rose $ 1.5 million, or 4.7 percent, in July 2020 $ 33.9 million, Shelnutt said.
– A decrease in corporate tax levies of $ 12.9 million, or 24.4%, from July 2020 to $ 39.9 million, beating forecast by $ 1.9 million, or 5%.