JULY 2024 REVENUE REPORT

STATE REVENUE COLLECTIONS SLIGHTLY BELOW TARGET IN NEW FISCAL YEAR

The Arkansas Department of Finance and Administration (DFA) issued the official revenue report today for collections in July, the first month of the new 2025 fiscal year.  Net General Revenue was $2.8 Million or only .5% less than forecast which is certainly well within the margin of error.  As expected, July revenue was less than last July due to Individual and Corporate Income Tax cuts.  Total revenue was $25.6 million or 4.6% below last year. 

As expected, Individual Income Tax collections declined by $28.7 million or 10.4% due to recent income tax cuts.  Individual Income Tax collections slightly exceeded the forecast $0.1 million or 0.1%.  DFA stated that Withholding category of income tax decreased by $23.6 million, “reflecting the negative effects of a payday timing factors and anticipated effects of recent tax cuts.”

Sales and Use Tax collections were $7.8 Million or 2.8 percent higher than last July.  This ends a two-month trend where Sales and Use Tax collections were less than same month previous year.  Sales and Use Tax should see an inflationary boost in recent economy even on same level sales as last year.  Economists will likely be tracking inflation vs sales tax collections trends.  DFA maintains records of taxable sales by industry sector that can demonstrate if there is improving sales tax economy above inflation. 

Corporate Income Tax which DFA points out is highly variable decreased by $8.3 million and was below last July and $3.3 million below forecast.

July ends a trend of revenue collections above forecast and growing a state surplus.  The good news is that both Individual Income and Sales and Use Tax, the two main sources of state revenue began the year slightly above forecast. Also, Sales and Use Tax returned to a growth level above last year and above forecast.  After recent Income Tax cuts this fiscal year may not provide substantial surpluses that the State has experienced in recent years. 

Planning has already begun for budgeting state agencies and providing critical services as well as considering additional tax cuts in the legislative session that will begin next year. If the economy does not show substantial improvement and begin to demonstrate growth with surpluses in the next few months, surpluses collected from prior fiscal years may be required to fund budget increases next session. 

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

Tim Leathers