AUGUST 2024 REVENUE REPORT

STATE REVENUE RETURNS TO SURPLUS IN AUGUST

After beginning the State’s new fiscal year in July with revenue slightly below forecast, August collections were above forecast, returning the year to revenue surplus category. The Arkansas Department of Finance and Administration (DFA) issued the general revenue collection report for August today, showing collections to be $9.9 million, or 2%, above forecast for the month. Collections were above forecast in the major tax categories of Individual Income Tax and Sales and Use Tax in what DFA described as “a relatively low collection month for these categories.”

As expected after recent tax cuts, Individual Income Tax collections decreased in August, down $18.7 million or 7.3%. However, the decrease was less than anticipated, with collections coming in $4.4 million or 1.9% above forecast. Collection of Withholding Income Tax increased after withholding tables were adjusted for the income tax changes. Withholding Income Tax increased by $2.6 million or 1.2% over last August. Despite lower tax rates, this suggests that more income is being earned by more employees, or employees are making more money. Either of these reasons is a positive economic sign.

Sales and Use Tax collections were $14.8 million above August 2023 levels, which was $12.1 million or 4.1% above forecast. DFA stated, “Collections in the Retail Sector were up 5.0% compared to last year.” This is encouraging news, especially after Sales and Use Tax collections were slightly down last month when there should have been built-in increases due to price inflation. As inflation decreases, a study comparing recent Sales and Use Tax collections to price inflation would be appropriate to determine what portion of the collection increases are economically driven. Additionally, as highway construction and other government spending slow in the coming months, the impact of these factors on Sales and Use Tax should be studied. On a micro level, the $75 per customer credit that Entergy issued in settlement to customers in August should be reflected in lower Sales and Use Tax collections next month.

Corporate Income Tax decreased by $5.3 million compared to last August and was $4.6 million below forecast. August is typically a low collection month for Corporate Income Tax, which is known to be highly variable and difficult to predict on a monthly basis.

It is hard to read much into a low collection month like August. However, being ahead of forecast is always positive, especially after being slightly below last month. As we return to a surplus, let’s hope this trend continues.

The August 2024 revenue report may be viewed and downloaded here.