Gross tax collections in Arkansas came in below forecast and year ago levels in November as nervous state lawmakers hope strong holiday sales boost state coffers ahead of the 2017 general session.
Heading into the 91st General Assembly, Gov. Asa Hutchinson and Sen. Bart Hester, R-Cave Springs, have proposed respective tax cuts of $50 million and $105 million that will likely put pressure on the legislature to rein in spending and put a cap on legislation proposing tax subsidies without offsets.
In early November, Hutchinson proposed plans for the second round of tax cuts in his tenure as governor, telling lawmakers he will seek a $50 million tax cut as part of his balanced budget of nearly $5.5 billion for the biennium. According to budget details provided by DFA officials, the executive recommendation calls for an upward revenue revision of 2.9% when compared to fiscal 2017 forecast, which would bring in an expected $153.5 million in additional funding for the current year.
It calls for a 2.8% increase in general revenues in fiscal year 2018, up $149.1 million, and a 4.9% increase in fiscal year 2019, up $266 million. General revenues are primarily driven by individual and corporate income tax collections, sales taxes and other tax collections by the state.
The governor’s plan also calls for a more robust 4.4% increase in general revenues in fiscal year 2019 of $5.7 billion, up $964.6 million from fiscal year 2018. General revenues are primarily driven by individual and corporate income tax collections, sales taxes and other tax collections by the state.
Hester’s $105 million tax cut proposal would put even more restraints on lawmakers in January. The Northwest Arkansas legislator’s plan would expand the current 5% income tax bracket to all taxpayers with annual incomes between $25,000 to $50,000. Hester told Talk Business & Politics his proposal would benefit people with incomes of $21,000 to $35,000, or add another 187,000 to the 5% income tax bracket, he said. After reviewing last month’s revenue report, Hester said he believes Arkansas will continue to see healthier economic numbers over the remainder of the fiscal year that runs through June 30, 2017.
If holiday day tax collections don’t boost revenue collections above current levels, lawmakers make have to quell expectations across the board going into the next year’s session. To date, forecasts for holiday sales three weeks before Christmas are mostly mixed, with some retailers reporting better online sales, but shoppers are put fewer items in their basket and spending less than a year ago.
According to the monthly financial snapshot released Friday (Dec. 2) by the Arkansas Department of Finance & Administration (DF&A), net available general revenues in November were $380.7 million, a slight gain $6.1 million or 1.6% above last year and $12.6 million or 3.4% above forecast. November results were above forecast in two major categories of collections, individual and corporate income tax, state budget officials said.
However, November gross revenue collections were only $448.5 million, a decrease of $14.5 million, or 3.1% below last year, and $4.3 million, or 1% below forecast. Year-to-date gross collections were up $23.4 million, or 0.9% to $2.498 billion, but below forecast by $21.1 million, or 0.8%.
Year-to-date, net available general revenues were $2.1 billion, $35 million or 1.7% above year ago levels. However, after five months into the fiscal year, net available revenue is $10.6 million or 0.5% below forecast with only one reporting month left before the 2017 general session begins.
November sales and use tax collections continued to disappoint. Revenue tallies for the month were $184.5 million, a decrease of $400,000, or 0.2% below last year. Collections were below monthly forecast levels by $8.7 million, or 4.5%.
Monthly individual income tax collections totaled $202.2 million. Collections decreased by $11.2 million, or 5.3% from last year. Collections were $1.6 million, or 0.8% above forecast. Individual withholding decreased 5.8% compared to last year, due to monthly payday timing effects a year ago, DFA officials said.
November corporate income collections totaled $10.4 million, an increase of $2.8 million from year ago, and $2.7 million above forecast. Corporate income tax refunds were $4.3 million, $16.1 million below year ago levels and $9.7 million below forecast.
OTHER TAX REVENUE SOURCES
July-Nov. 2017: $22.9 million
July-Nov. 2016: $22.4 million
Games of skill
July-Nov. 2017: $23.4 million
July-Nov. 2016: $21.8 million
July-Nov. 2017: $92.6 million
July-Nov. 2016: $94.4 million
July-Nov. 2017: $42.6 million
July-Nov. 2016: $43.6 million