Arkansas Economy Continues Growth, Shows Strong Sales Tax Numbers

Feb 4, 2020

This month's revenue report showcased strong numbers in sales and use tax collection, up 8% from last year
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Arkansas’s economy continues to improve according to the latest numbers from the state Department of Finance and Administration.

According to the most recent revenue report, released Tuesday, the state has a net available revenue of $594.6 million. That’s a 7.3% increase compared to this time last year and .2% above forecast.

One area that saw significant gains is sales and use tax collections, which totaled $224.4 million, an 8% increase compared to the year before. Dr. Michael Pakko is the state economic forecaster at the Arkansas Economic Development Institute. While holiday shopping could be one reason for this boost, he says online retail sales taxes, a newer addition, could also be a contributing factor.

“It’s not clear exactly how much of it is strong holiday shopping and how much of it is new sources of revenue, but that’s a fairly large increase for a year over year number,” Pakko said.

With the state seven months into the fiscal year, Pakko says these current numbers show a state economy in pretty good condition revenue-wise.

“With gross revenues over $80 million above forecast and net available revenues nearly $100 million above forecast, so in terms of the budget itself, things are looking pretty good for the state,” Pakko said.

The motor vehicle section of sales tax also saw “moderate growth” according to the report. While an end of the year surge could be a factor in the increase, Pakko says this number is overall a positive for Arkansas.

“I think one thing that’s significant about the fact that strong, or decent auto sales were noted in this report is that contrasts with what has been some weakness in auto sales nationwide. So to see that component still seems to be going alright here in Arkansas is a positive indication,” Pakko said. 

Gaming revenue came in at $500,000 above forecast, but was also down compared to the year prior. Pakko says the expansion of casinos, passed by voters in 2018, has caused the gaming tax to go into a transitional phase.

“There’s a different tax structure that applies to those casinos than it did before, when they were just racetracks with gaming. So, there’s more of the revenue being diverted to the counties in which the casinos operate and less to the state. And we’ve still got the Pine Bluff casino yet to come online. So there’s kind of a transition phase right now between different regimes of legalized gambling in Arkansas,” Pakko said.