Arkansas’ January tax revenue hit by weak retail sales

The percentage increase in year-to-date Arkansas gross tax collections fell to 2.1% in January compared to a 3.4% level in the December report. Also, sales and use tax collections continue to come in below the budget forecast, a potential sign of uncertainty among Arkansas consumers.

Year-to-date gross revenue (July 2013-Jan. 2013) totaled $3.482 billion, 2.1% above the same period last year and above forecast by 0.7%, according to the report issued Tuesday (Feb. 4) by the Arkansas Department of Finance and Administration.

Individual income taxes for the fiscal year totaled $1.68 billion, up 0.5% from last year and 1% above the budget forecast. Year-to-date sales and use tax collections were $1.279 billion, up 3.4% above last year and below forecast by 0.7%. Income taxes and the sales and use tax collections are the two primary sources of state revenue.

“Sales and Use tax represented the major drag on collections in January. Collection growth was only 0.2 percent compared to year ago and 4.0 percent below forecast. Weaker than expected retail sales to consumers accounted for this result,” John Shelnutt, head of the Department of Finance and Administration’s Economic (DFA) Analysis & Tax Research division, noted in his report.

Corporate income tax collections for the first seven reporting months of the fiscal year totaled $234.5 million, up 6.9% compared to last year and 5.5% above forecast.

In a Tuesday morning interview with Roby Brock for a Talk Business Internet broadcast, Gov. Mike Beebe said consumer spending could be weather related but he does watch for trends in the tax collection reports.

“You try to follow trends, and the trend currently is that we’re on forecast,” Beebe explained. “It tells me whether or not i have to cut the forecast. … You don’t want to get behind the curve and wait too late to have to make adjustments in the forecast, because if you do that, then it compresses in a time period decisions that can be much harder to make, or much harder to live with.”

The revenue forecast for fiscal year 2015 is $6.333 billion, up just 2.1% above the 2014 estimate. The 2015 estimate includes an anticipated reduction of $85.2 million from tax cuts approved in the 2013 Legislative Session.

JANUARY NUMBERS
January gross revenue was $560.5 million, down 3.9% above last year and 0.7% below forecast.

Individual income tax collections during January totaled $320 million, down 6.3% compared to January 2012 and above forecast by 0.2%.

Sales and use tax collections during the month totaled $178.6 million, up just 0.2% from last year and 4% below the forecast.

Corporate income tax collections January totaled $30.9 million, up $3 million from January 2013 and 11.2% above forecast.

OTHER TAX COLLECTIONS
Alcoholic beverage
July 2013 – Jan. 2013: $30.2 million
July 2012 – Jan. 2012: $29.1 million

Games of skill
July 2013 – Jan. 2013: $21.7 million
July 2012 – Jan. 2012: $19.1 million

Tobacco
July 2013 – Jan. 2013: $130.8 million
July 2012 – Jan. 2012: $131.9 million

Insurance
July 2013 – Jan. 2013: $45.3 million
July 2012 – Jan. 2012: $42.8 million

COLLECTIONS HISTORY
Tax collections during fiscal year 2013 (July 2012-June 2013) totaled $6.214 billion, up 4.9% above the previous fiscal year and up 2.5% compared to budget estimates. A result of the gain was a budget surplus of $299.5 million.

Fiscal year 2013 marked the third consecutive year of year-over-year gains. Arkansas tax collections reversed a negative two-year slide in the 2011 fiscal year, with collections up 4.5% in the July 2010-June 2011 period.

State tax collections for fiscal year 2011 totaled $5.673 billion, up 4.5% above the $5.43 billion in the 2010 period.

The biggest declines in the 2009 and 2010 fiscal years were with individual income tax collections and sales and use tax collections.