Arkansas’s tax revenue is growing at a higher rate than experts expected this year.
The state’s November general revenue report from Arkansas’s Department of Finance and Administration shows a gross revenue increase of 7.5 percent compared to last year. That’s an increase of $34.4 million dollars, bringing the total revenue amount to $492.2 million dollars.
The department published a new general revenue report in early November to better predict economic gains and losses for the fiscal year. The gains recorded this month still surpassed the expectations set in the general report.
Michael Pakko, the chief economist for the Arkansas Economic Development Institute says the monthly report is good news.
“What I always like to look at in these reports is what they tell us about what’s happening in the underlying economy, what’s going on in Arkansas’s economy. And I think the pieces of information we can get from this look pretty encouraging,” Pakko said.
According to the report, sales tax collections were up 8 percent compared to last year. Individual income tax collections are also up, this year by 7 percent.
“So those tell us that consumer spending is up and that’s supported by higher incomes. So those are good, encouraging signs of the Arkansas economy,” Pakko said.
John Shelnutt, an economic analyst and tax researcher for the Department of Finance and Administration believes one explanation for this increase in economic growth is a lower unemployment rate.
“Well of course we have a very tight labor market. We have good job growth throughout the sectors. I guess in recent months we’ve seen a shift from those who were working part-time for economic reasons, moving into full time jobs,” Shelnutt said. “So that’s essentially the final phase of tightening of the labor market where you move workers up to full hours as well as pay increases.”
The only revenue source that did not increase was tax collections from motor vehicle sales. Shelnutt believes this could be the result of consumers already owning the cars they need.
“I think in general, nationally we’re seeing that vehicle consumption has essentially topped out after a replacement cycle from the Great Recession. [This is] possibly due to higher car prices as well, unit sales have eventually topped out nationally, and in Arkansas,” Shelnutt said.
Even with the purchasing of vehicles down, Arkansans are still spending their money elsewhere and that’s in part due to a larger paycheck.
“Other than that, it looked like the income gains were across the board. The individual withholding was up 6.7 percent compared to a year ago. So that tells us that people who get their income from a regular paycheck are seeing income gains over a period of time,” Pakko said.
Pakko said these gains in revenue are especially important going into the holiday spending season.