State Revenue Report For May Higher Than Predicted, Though Lower Than Last Year
Revenue in Arkansas exceeded predictions but fell below figures from a year ago, according to the latest revenue report from the state Department of Finance and Administration.
According to the report released Tuesday, the state collected just under $482 million in Gross General Revenues for May. That’s 15.6% above the forecast, but 2.9% less than last May.
Dr. Michael Pakko is the chief economist and state economic forecaster at the Arkansas Economic Development Institute. He says while the coronavirus pandemic is still impacting the state’s economy, the numbers were not as bad as officials were expecting them to be.
"In a number of categories, the economy really appears stronger than we anticipated it would be under the circumstances," Pakko said.
One area with higher than expected results is sales and use tax collections, which in May, totaled $205.7 million, a 2.8% drop from this time last year, but 8.5% above what forecasters predicted.
Pakko says one reason for this unexpected amount in sales tax collections could be the economic stimulus relief sent to Americans due to the coronavirus pandemic.
"Economists generally consider those, kind of, one-time tax rebates or payments to not translate one for one to consumer spending. Some of it is set aside for contingencies. Some of it is used to pay off household debt. But it does appear that the support payments are helping to boost consumer spending during this time of closures and unemployment," Pakko said.
The collection of online sales tax provisions, which began at the beginning of the 2020 fiscal year back in July, could be another reason for the better than predicted sales and use tax numbers.
"That’s been a change in the tax collection regime that happened between last year and this year and even accounting for that, we’re still down 2.8% compared to May 2019. But undoubtedly some of that tax collection that’s coming from internet sales is helping to sustain government revenues in this situation," Pakko said
Another factor brought on by the coronavirus pandemic that has impacted the state’s economy, according to Pakko, is the delay of the state income tax deadline to July 15, as opposed to April 15. He says in April, individual income tax collections were down by $230 million or more.
"Now we’re in May, and income tax collections were up compared to last year, but we’re in an unusual situation where now the deadline is still a month and a half away. So, I guess what happened in May is that it was surprising that so many people submitted the taxes, so tax returns were trickling in over this period after the deadline had been postponed," Pakko said.
With one month left remaining of the 2020 fiscal year, total revenue is at $5.16 billion, which is 5.9% above forecast, but around 2% below levels from last year.