March 2024 Revenue Report

REVENUE ANALYSIS

MARCH STATE REVENUE HIT A HOME RUN WITH $67.2 MILLION ABOVE FORECAST

The Arkansas Department of Finance and Administration (DFA) reported today that March Net General Revenue came in at $67.2 million above forecast. This, when added to the previously reported amount above forecast, brings the total fiscal year surplus to $317.8 million with three months left in the year. March revenue was above forecast in all major categories (Individual Income Tax, Corporate Income Tax, and Sales Tax). The March report comes as the legislature is set to begin its fiscal session next week where budget priorities will be set for spending or allocating state revenue. The apparent health of the economy and growing tax collections should make financial planning less difficult than most sessions for the decision makers.

In addition to being above forecast, March revenue was also above actual collections last March by $34.4 million or 8.2%. This is contrary to the recent trend of revenue being above forecast but below last year’s collections as recent Individual Income Tax and Corporate Income Tax cuts have been absorbed. Perhaps a corner has been turned and the economy has grown to continue increased tax collections and fully absorb the current tax decreases.

DFA reported that Individual Income Tax was above forecast by $37.8 million or 14.3%. Individual Income Tax was above last year’s collections by $26.8 million or 9.7%. Individual Income Tax Withholding Tax increased by $23.3 million or 10.4% compared to last March. Withholding growth means payroll growth, which is the strongest economic indicator.

DFA stated that Sales Tax displayed growth over the previous year in “most major reporting sectors”. Sales and Use Tax was above forecast by $19.9 million or 7.2%. Collections were $11.9 million above actual collections last March. The report did note that motor vehicle sales tax was down 19.2% from last March. It should also be noted that sales tax on motor vehicles is paid weeks or months after purchases because of the time the law allows for payment to be made.

Corporate Income Tax was $5.4 million above forecast, and Corporate Income Tax Refunds was $4.4 million less than forecast. March is not a major reporting month for Corporate Income Tax, and the tax is often volatile and variable in time of payment.

Now that the parameters are all set for the Fiscal Session, we will observe whether the conservative cautionary budgeting of recent years will continue. If so, with the current surplus, there will likely soon be serious discussions of new tax cuts. We will watch with interest as the session progresses.

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

Arkansas Democrat Gazette

4/2/24

Arkansas' March tax revenue up to 3.2%, year-to-date revenue down 1.5%

Talk Business

4/2/24

Kelly SullivanApril 30, 2024