Fueled by better-than-expected personal and corporate income and sales tax collections, the state government’s general income tax collection in September increased by $ 103.9 million, or 15.7%, compared with the same month a year ago to reach $ 765.3 million.
Last month’s collection exceeded the state’s forecast for the month by $ 179.2 million or 30.6%, the Ministry of Finance and State Administration said on Monday in its monthly report on income.
September’s transport is a record for the month, surpassing the previous record of $ 664.5 million in September 2019, said Whitney McLaughlin, tax analyst for the finance department.
Quarterly personal and corporate income tax payments in September accounted for much of what was higher than expected, the finance department reported.
The two main sources of general government revenue are personal income taxes and sales and use taxes.
Tax refunds and some special government expenses are removed from the top of the total collection, leaving a net amount that state agencies are allowed to spend. Net general revenue helps fund government-supported programs such as public schools, social service programs, public colleges and universities, and prison programs.
The net in September was up $ 98.5 million or 16.6% from the same month a year ago to $ 690.3 million and beat forecast by $ 162.7 million or 30 , 8%.
Gov. Asa Hutchinson said on Monday that the state had exceeded its general revenue forecast for 31 consecutive months, dating back to March 2019.
“This confirms that our economy continues to improve as we emerge from the COVID-19 pandemic, and that our decision to keep the economy open for business was important to our families and the incomes of protected workers,” said said the Republican governor in a written statement.
“The excess trend line puts Arkansas in a good position to benefit from another gradual reduction in income tax rates.”
September is the third month of fiscal 2022, which began on July 1 and ends on June 30, 2022.
In the first three months of fiscal 2022, total general revenue decreased $ 39 million or 2% from the same period of fiscal 2021 to $ 1.95 billion, but exceeded forecast of $ 282.8 million or 16.9%.
The comparison of the total collection for fiscal year 2022 with the totals for fiscal year 2021 is skewed because the state moved its deadline for reporting and paying personal income tax in 2020 from April 15 to July 15 to coincide with the change of these deadlines by the federal government amid the coronavirus pandemic, the finance ministry noted. .
In the first three months of fiscal 2022, net general revenue decreased $ 19.1 million or 1.1% from the same period of fiscal 2021 to $ 1.72 billion, but beat forecast by $ 249.1 million or 1.1%.
John Shelnutt, the state’s chief economic forecaster, said that collections in September and the first three months of fiscal 2022 “indicate a mixture of continued expansion in the state’s economy and strong growth stemming from the rebound of the hardest hit sectors during the limited period. operational stage of the pandemic. “
“The growth in payroll deductions is almost double the multi-year average before the pandemic and is widely distributed across all sectors of production of goods and services,” he said.
Gains in sales tax collection gains are also widespread, indicating a response to the general expansion and not reliance on stimulus cash payments at this point, he said.
“The initial V-shaped economic recovery in Arkansas was joined by the remaining sectors that were most affected,” Shelnutt said in a written statement.
Although a moderation in the growth of general income tax collection is expected in the second half of FY2022 and into FY2023 with all sectors recovered, the combination of sector gains the first quarter was impressive in terms of scale and speed, Shelnutt said.
“The speed of adjustment exceeds previous episodes of recovery from normal recessions,” he said. “But Arkansas’ slightly faster pace than the US average is a familiar pattern for the state. Catching up by other large states and the national average may also be faster this time around.”
BUDGET AND IMPTS
Earlier this year, the Republican-dominated General Assembly and Hutchinson adopted a general revenue budget for fiscal 2022 totaling $ 5.849 billion, including an allocation of $ 17.1 million to the fund. restricted reserve. The budget also forecasts a surplus of $ 17 million.
The current forecast for fiscal year 2022 is that all categories of the income stabilization law, which distributes the money to state-supported programs, will be fully funded, the finance department spokesperson said, Scott Hardin.
The FY2022 budget is based on a forecast of estimated net general revenue of $ 6.06 billion before the Legislative Assembly’s tax reduction measures collectively reduce forecasted net general revenue by 203.1 billion. million dollars, according to legislative records.
Impacts of the tax cut include the state waiving $ 179 million by not collecting income tax on loans canceled through the federal paycheck protection program, $ 3 million by not taxing unemployment benefits and other tax cuts.
In FY2021, the general revenue budget stood at $ 5.899 billion, Hardin said.
Arkansas’ surplus set a record in fiscal 2021, totaling $ 945.7 million, more than double the previous record of $ 409.3 million in fiscal 2007, according to records of the finance department.
The Long-Term Reserve Fund, which Hutchinson called the State Savings Account, was the main beneficiary of the surplus. His balance is now $ 1.2 billion, Hardin said.
Hutchinson has not announced when the special session on reducing income taxes will be held.
Among other things, Hutchinson and legislative leaders weighed in proposals to lower the top rate to 5.5% within a year or two, then gradually introduce a further cut to 4.9%, and combine the tables low and middle income tax in one for people with taxable net income up to $ 82,000 per year.
A law enacted in 2019 reduced the maximum rate from 6.9% to 6.6% on January 1, 2020 and to 5.9% on January 1, 2021.
According to the finance department, general revenue for September included:
• An increase of $ 12.9 million or 4% in personal income tax collections from the same month a year ago to $ 332.8 million, which was higher than forecast by $ 80 million. dollars or 31.7%.
Withholding tax is the largest category of personal income tax.
Withholding tax collections increased $ 15.9 million from the same month a year ago to $ 217.4 million and were above plan by $ 17.9 million or 7.9 %.
The increase in the holdback reflects more people working and more people working longer hours, Shelnutt said.
“The biggest payroll deduction gains were in sectors that experienced a subsequent rebound from the pandemic – restaurants, transportation and temporary help services,” he said.
Estimated payment recoveries fell $ 2.2 million from a year ago to $ 96.6 million, but were above plan by $ 51.1 million.
• A 27.8 million Australian dollar or 12% increase in sales and use tax revenue from the same month a year ago to 259 million dollars, which is higher than forecast by 23.3 million dollars or 9.9%.
Most of the major sales tax reporting sectors showed strong growth compared to the same month a year ago, reflecting continued economic expansion in many sectors and the subsequent rebound in the recovery sectors. services and catering, said the finance department.
Restaurant collections grew 16% from $ 19.3 million in September 2020 to nearly $ 22.5 million last month, while personal service collections grew 22% from 7 , $ 3 million in September 2020 to $ 8.9 million last month and transportation increased 134% from $ 747,133.25 in September 2020 to $ 1.7 million last month, said Hardin.
• A $ 62.4 million or 80.4% increase in corporate income tax collection over a year ago to $ 140 million, which was 72 million higher than forecast, $ 4 million or 107.1%.
Estimated quarterly corporate income tax collection payments totaled $ 131.7 million, $ 68.1 million above forecast.