Revenue report: Fuel prices slow consumer spending

Arkansas’ May revenue report suggests higher fuel prices are slowing consumer spending, which in turn pushed sales tax collections below the forecast.

Overall, state tax collections for the 11 months of the fiscal year 2011 remain above the 2010 period. For the year (July 2010-May 2011), total collections are $5.121 billion, up 4% above the $4.924 billion in the 2010 period, according to the Arkansas Department of Finance & Administration report released Thursday (June 2). The collections were 0.4% above forecasts.

Total state revenue of $5.43 billion in fiscal year 2010 was 2.4% below the previous fiscal year and marked the second consecutive year of revenue decline. In fiscal year 2010 (July 1, 2009 – June 30, 2010), total state revenue was down $130.7 million (2.4%), but $73.3 million above budget estimates. The biggest declines were with individual income tax collections and sales and use tax collections — both serving as decent gauges of consumer spending.

May total collections reached $414.2 million, up 3.2% over May 2010, and 2% above forecasts. Collections in May of gross receipts — primarily from sales and use taxes — totaled $166.4 million, up 1.3% above May 2010, but 3.4% below forecasts.

“Individual income tax and corporate income tax are slightly above forecast and gross receipts (sales taxes) are slightly below after eleven months into the fiscal year,” John Shelnutt, director of economic analysis and tax research at DFA, noted in the report. “In general, income tax collections exceeded expectations in the second half of the fiscal year while sales taxes appear to be weakening in conjunction with higher fuel prices.”

Year-to-date gross receipts collections totaled $1.906 billion, up 4.9% above the 2010 period and 0.3% below forecast.

Year-to-date individual income tax collections total $2.503 billion, 6.3% above the year ago period and 0.9% above forecast. May individual income tax collections totaled $197.4 million, 0.9% above year ago levels and 4.5% above the forecast.

Year-to-date corporate income tax collections are $318.7 million, down 13% from a year ago, and 0.5% above a revised forecast. The decline, Shelnut noted, is because of a large one-time gain in the previous fiscal year.

As it was in the April report, refunds during May for individual and corporate income taxes were lower than expected. The decline in refunds has helped boost the gross revenue level.

Individual income tax refunds total $153.7 million for the year, up from the $147.9 million in the 2010 period. Corporate income tax refunds for the 2011 fiscal year total $35.4 million, down from the $54.2 million in the 2010 period.

OTHER TAX COLLECTIONS
• Alcoholic beverage
July 2010-May 2011: $29 million
July 2009-May 2010: $26.3 million

• Tobacco
July 2010-May 2011: $220.1 million
July 2009-May 2010: $223.5 million

• Games of skill
July 2010-May 2011: $12.6 million
July 2009-May 2010: $7.7 million

• Racing (Oaklawn, Southland)
July 2010-May 2011: $3.7 million
July 2009-May 2010: $4.3 million