August Revenue Report
Today the Arkansas Department of Finance and Administration (DFA) reported another stellar month of tax collections with August revenue exceeding their forecast by $47.1 million. This brings the total surplus above the year-to-date forecast to $86.3 million after only two months in the new fiscal year. This early in the fiscal year is normally too soon to predict a trend that these collections levels will continue. However, it is important to note that the normally fiscally conservative DFA has indicated that the August performance is related to economic factors and not payment anomalies, tax law changes, or other non-economic factors.
DFA reported that August tax collections exceeded their forecast in all major categories. They reported that individual income tax growth was from payroll withholding tax and payments with returns which are directly related to economic performance. They also reported that the sales tax growth was broad based across all sectors which also would indicate improving economy.
August individual income tax collections exceeded forecast by $28.4 million or a substantial 12%. Individual income tax withheld from employee payrolls was up 7.1% compared to last year. Employee withholding performance exceeding forecast indicates that more people are working, people are working more hours, or wages are increasing. These factors in combination reflect an improving economy.
August sales tax collections exceeded forecast by $14.3 million or 5.9%. DFA reported, “Most major reporting sectors of Sales Tax displayed high growth over the prior year, reflecting continuing economic expansion in many sectors and rebound from later recovery in service sectors and restaurants.” DFA has the data to individually examine the sectors that the surplus represents. If they are confident enough to attribute the performance to economic factors, it is probably a good bet that they have some confidence that the trend will continue.
The good tax collection and state economic news this month position Governor Hutchinson and the legislature to propose and pass new tax cut laws during the much-discussed possible special legislative session. If current collection trends continue until a special session this fall, Governor Hutchinson may be able to raise the forecast to fund tax cuts. Perhaps the optimistic August report from DFA is an indication of good times to come.
The August 2021 revenue report may be viewed and downloaded here.