May tax revenue down only 2%; Gov. Hutchinson ‘delighted’ with the report

May tax revenues did not see a big decline because of the COVID-19 disruption. Arkansas tax revenue in the first 11 months of the fiscal year (July 2019-May 2020) is down 2%, and revenue in the May report was down just 2.9%, much better than the 28% drop in April.

Year-to-date gross general tax revenue totaled $6.271 billion, down 2% from the same period in 2019, and 3.2% above the revised budget estimate, according to figures provided Tuesday (June 2) by the Arkansas Department of Finance and Administration (DFA). The year-to-date gross general revenue decline is $129.1 million.

Individual income tax revenue for the fiscal year-to-date is $3.116 billion, down 2.4% compared with the previous period and 4.8% above forecast. Income tax refunds year-to-date total $474 million, down 3.7% compared with the same period in the previous fiscal year, and 16.2% below the budget forecast.

Year-to-date sales and use tax revenue was $2.316 billion, up 0.2% compared with the previous cycle and 2.7% above the forecast. Corporate income taxes for the year are $418.8 million, down 15.7% from the previous year and 10.2% above forecast.

Gov. Asa Hutchinson said the revenue numbers were a surprise considering the revised expectations.

“With the month of May, we were 3.4% below last year in state revenue. But this is really extraordinarily good compared to what the projections were. So I’m delighted with the individual income tax collections, with the fact that people are going back to work. The sales tax collection shows that people are gaining confidence in our economy again, and this is good news for us,” he said Tuesday.

The governor also said the improving numbers will cause him to review budget numbers for the fiscal year that begins July 1, and possibly “loosen the belt just a little bit” with some state agencies.

John Shelnutt, DFA director of economic analysis and tax research, said tax revenue from retail and auto sales were above estimates.

“All major categories of revenue collections were above forecast, and most were below year ago levels in response to COVID-19 closure effects in April. Individual Income tax collections were above year ago and forecast as tax payments came in better than expected considering the due date shift to July,” Shelnutt noted in his report. “Sales and Use tax collections were above forecast with better than expected gains in retail and motor vehicle sales categories.”

MAY NUMBERS
Gross general revenue collected in May totaled $481.9 million, down 2.9% compared with May 2019 and 15.6% above the forecast.

Individual income tax revenue in May was $235.4 million, up 1.3% compared with May 2019 and 25.9% above the forecast.

Sales and use tax revenue – an indicator of consumer spending – was $205.7 million, down 2.8% compared with May 2019 and 8.5% above the forecast. Corporate income tax revenue was $15.1 million, down $2 million compared with May 2019 and $1.5 million above the forecast.

OTHER TAX REVENUE SOURCES
Tobacco
July-May 2020: $200.6 million
July-May 2019: $195.2 million

Insurance
July-May 2020: $61.5 million
July-May 2019: $65.4 million

Alcoholic beverages
July-May 2020: $54.7 million
July-May 2019: $53.5 million

Games of skill
July-May 2020: $31.2 million
July-May 2019: $63.5 million