November Revenue Report
Today the Arkansas Department of Finance and Administration (DFA) released the report for General Revenue collected in November. DFA reported that tax collections exceeded the recently revised and increased forecast in all major categories. Total November General Revenue exceeded forecast by $57.2 Million or 12.9%.
After five months in the fiscal year, total collections now exceed the revised forecast by $73 Million or 2.7%. This additional revenue positions the Governor and legislature well as they begin a special legislative session to reduce income taxes next week. The amount above forecast is in addition to amounts DFA has projected to fund the tax cuts the Governor has proposed. It also indicates continued economic growth and recovery for the future above what has been expected.
Individual income tax was $31.3 Million or 13.1% above forecast in November. This was partially offset by increased tax refunds above forecast by $8.7 Million. Individual income tax was up in both payroll withholding and tax due returns. Withholding from paychecks was up $6.7M which is a prime indicator of economic improvement.
Sales and use tax was $19.2 Million or 8.2% above forecast. DFA reported that growth was mixed among the various reporting sectors. Businesses recovering late from the COVID economy experienced higher sales growth while businesses that recovered earlier experienced lower growth. Sales and use tax maintains a total positive growth trend which is a good indicator of continued economic growth.
In addition to General Revenue, the legislature must also consider other impacted revenue categories and the effect that tax cuts will have on critical non-general revenue funding. K-12 education receives substantial revenue from the Educational Adequacy Trust fund which is largely generated from special sales tax collections. This fund is exceptionally important since the Arkansas Constitution mandates adequate funding of K-12 education. Recent economic activity has provided collections for this fund that exceed prior forecasts. DFA reports that for November, the fund increased $51.7 Million which is 17.4%. When considering tax cuts next week, this financial report for schools should not be an impediment to tax cuts.
After November has been counted, it appears that the economy will support the tax cuts in the Governor’s plan. Whether it will support alternative or additional cuts that may be proposed by legislators will likely be a topic of discussion in coming days.
The November 2021 revenue report may be viewed and downloaded here.