Arkansas tax revenue continues to beat prior-year levels and forecasts despite an economy weighed down by the COVID-19 pandemic. Tax collections during the first quarter (July-September) of the fiscal year provided $158.8 million more in available revenue than expected.
The gross general revenue was $1.993 billion, up 17.7% compared to the same period in 2019, and up 11.6% above the budget forecast, according to Friday’s (Sept. 2) report from the Arkansas Department of Finance and Administration (DFA).
Individual income tax revenue in the first quarter of the fiscal year was $1.005 billion million, up 25.8% compared to the same period in 2019 and up 11.6% over the budget forecast. Sales and use tax revenue – an indicator of consumer spending – during the first quarter was $703.9 million, up 10.3% compared with the same period in 2019 and up 11.4% above budget forecast.
John Shelnutt, DFA director of economic analysis and tax research, said some of the gains come from the income tax deadline shift from April to July. He also credited gains vehicle sales for part of the sales tax revenue increase.
Corporate income tax revenue during the first quarter of the fiscal year was $134.1 million, up $16.8 million compared with the same period in 2019, and up 21% from the budget forecast.
Greg Kaza, an economist and director of the Arkansas Policy Foundation, said the tax revenue could indicate the economy is recovering.
“It’s possible the economy is already in recovery, according to the four coincident indicators. U.S. and Arkansas payroll employment reached troughs in April, along with U.S. industrial production. Real personal income excluding current transfer receipts and real manufacturing and trade sales also appear to have reached troughs earlier this year (2Q-2020),” Kaza noted in an e-mail to Talk Business & Politics. “It’s counterintuitive to suggest ‘bust’ when popular opinion argues ‘boom.’ Likewise, cyclical turning points are not popularly accepted until well after they have occurred in real time.”
University of Arkansas at Little Rock economist Michael Pakko said the gain in sales tax collections is “remarkable.”
“Tracking the taxable sales data through the pandemic, my research has indicated that the shutdown-related economic contraction was far less severe in Arkansas than in other parts of the country, particularly when it comes to consumer spending. More important, we’re now seeing a dramatic surge in consumer spending during this period of recovery,” Pakko noted.
He also said Friday’s revenue report is a good sign for the state’s budget and praised state officials for their approach to budgeting when the pandemic began.
“As far as the state’s fiscal position is concerned, it is clear that revenue officials took a reasonable and conservative approach to estimating tax revenue for FY 2021. The fact that the Arkansas economy is outperforming those expectations is good news, and puts the state in the position of having a buffer against any future revenue losses that might emerge before this pandemic-induced economic contraction is over,” he said.
Gross revenue in the month totaled $661.5 million, down 0.5% compared with September 2019, and 12.5% above the forecast.
Individual income tax revenue totaled $320 million in September, down 5.3% compared with September 2019, and 17.6% above the forecast. Sales and Use tax revenue in September totaled $231.2 million, up 10.4% compared with September 2019 and up 8.8% above the forecast. Corporate income tax revenue was $77.6 million in September, down $10.5 million compared with September 2019, but 2.4% above the forecast.
The previous fiscal year (July 2019-June 2020) ended with $369.4 million in net available revenue more than expected. Fiscal year 2020 tax revenue ended down just 2.5% despite several months in early 2020 of economic disruption resulting from COVID-19 shutdowns. The revenue was 4.1% above the revised forecast. Gross revenue in the previous fiscal year was $6.967 billion, 2.5% below fiscal year 2019, but up $272.5 million more than the forecast.
OTHER REVENUE SOURCES
July-September 2020: $58.4 million
July-September 2019: $56.5 million
July-September 2020: $17.4 million
July-September 2019: $15.7 million
Games of skill
July-September 2020: $7.6 million
July-September 2019: $11 million
July-September 2020: $21.8 million
July-September 2019: $21.5 million