State tax revenue up 2.1%

Arkansas tax collections were up again in January. It’s good economic news that could be bad news for Gov. Mike Beebe and Legislative leaders trying to push back a tide of tax cut legislation filed primarily by new Republican members of the Arkansas General Assembly.

For the year (July 2010-Jan. 2011), gross collections total $3.168 billion, up 2.1% above the same period a year ago. However, the collections were 0.7% below forecasts.

January total collections reached $529.9 million, up 0.9% above January 2010, but 2.8% below forecasts.

“The Gross Receipts tax was up 6.1 percent over last year representing broad-based gains across consumer and business spending,” according to the revenue report released Wednesday (Feb. 2) by the Arkansas Department of Finance & Administration. “Overall collections growth was up 2.1 percent, reflecting rebound from weakness in year ago collections. Collections growth adjusted for one- time events is notably higher since corporate income tax included $60 million one-time audit payments last year.”

Year-to-date gross receipts collections — primarily sales and use taxes — are $1.237 billion, up $71.1 million or 6.1% above the previous year-to-date period. The collections are 0.2% below forecast.

However, January gross receipts collections were down 3.1%, totaling $173.9 million.

“The negative comparison to year ago levels was impacted by one-time collection events last year,” noted the vague explanation from DFA.

Year-to-date individual income tax collections total $1.488 billion, $67.6 million or 4.8% above the year ago period. January individual income tax collections totaled $311 million, up 10.2% above year ago levels and up 1.9% above forecast. The largest category of individual income tax — withholding —was 11.5% greater than January 2010, and is up 9.6% over the forecast.

Year-to-date corporate income tax collections are $192.7 million, down 25.9% from a year ago, and down 10.2% below forecasts.

Gov. Mike Beebe has said his $4.6 billion budget — which includes about $130 million in growth funding for schools, prisons, human services and a half-cent grocery tax cut — is airtight.

Some lawmakers, primarily in the GOP, have suggested otherwise. Tax cut proposals include reductions in the used car tax, reduction or elimination of the utility sales tax for manufacturers and cuts in personal and corporate income tax rates.

“It probably will in the grand scheme of things,” said Sen. Jake Files, R-Fort Smith, when asked if improving tax collections will help make the case for tax cuts. “But once again, it just gives further credence, in my opinion, that we have to review every spending line and make sure that government is not growing while the private sector remains flat.”

Even with the improving revenue, Files said all Legislators “have to be responsible” and first address school funding and “other big-ticket items” in the state budget.