State’s tax collections exceeding expectations
Posted on Thursday, April 3, 2008
Individual income tax collections in Arkansas are exceeding the state’s official expectations considerably.
One result is that total general revenue — individual income taxes plus certain other taxes — increased $ 6. 6 million in March over the same month last year and outpaced the state’s official forecast for last month by $ 8. 6 million.
The month’s sum, consisting mainly of income taxes and sales taxes, was $ 469. 1 million.
Richard Weiss, the state’s chief fiscal officer, summed up collections this way: “We just had another strong month.” Of the state’s oft-topped official forecast, “We were just overly cautious, erred on the side of caution,” he said.
The $ 469. 1 million is a 1. 4 percent increase over March last year and 1. 9 percent above the forecast, the state Department of Finance and Administration said in its general revenue report Wednesday for March.
The total topped the previous March record of $ 462. 5 million last year.
A legislative revenue researcher said he anticipates the state will finish the current fiscal year with a surplus above $ 150 million, something he attributes in part to growth in income tax collections.
In the first nine months of this fiscal year, general revenue reached $ 3. 947 billion. That’s an increase of $ 130. 2 million, or 3. 4 percent, above the same period last fiscal year and $ 144. 8 million, or 3. 8 percent, above the forecast.
The report cautioned that substantial one-time gains in collections stemming from “non-recurring business transactions” account for $ 65 million of the increase. These transactions by certain large companies don’t reflect the underlying economy, said John Shelnutt, the state’s chief economic forecaster, who didn’t have additional details about the transactions.
The March report was released on the day Gov. Mike Beebe signed into law a bill to increase the state severance tax on natural gas, effective next Jan. 1, to raise money for road improvements, which Beebe says will help boost the state’s economy.
Next month’s report is likely to be the biggest revenue month of the fiscal year.
For the past four years, April’s collections have set records for the state. April 15 is the deadline for filing most state individual income tax returns. Last April’s collections totaled $ 691 million.
The individual income tax collections in March of this year totaled $ 203. 9 million, a $ 23. 8 million, or 13. 2 percent, increase over the same month last year. That’s $ 14. 4 million, or 7. 6 percent, above the forecast for the month.
Year-to-date individual income taxes totaled $ 1. 853 billion, a $ 167. 3 million (9. 9 percent ) increase above the collections for the same period in the last fiscal year. That’s $ 118. 4 million, or 6. 8 percent, above the forecast for those nine months.
For March, individual income tax withholding increased 15 percent over March 2007, accounting for much of the increase in income tax collections. There was one extra Friday pay day in the March collections, the state said. resulted from state sales tax rate reductions, such as the halving of the state’s 6 percent grocery tax, effective last July 1.
The “gross receipts” category includes sales and use taxes, a 10 percent mixed drink tax, 3 percent excise tax, as well as vehicle rental, residential moving and wholesale vending taxes.
The state reduces the gross collections with off-the-top distributions such as income tax refunds, resulting in a “net” revenue, which is available for spending by state government. March’s “net” totaled $ 343. 1 million, an increase of $ 24. 3 (7. 6 percent ) over the same month last year. That’s $ 22. 3 million (6. 9 percent ) above the forecast.
March was the ninth month in the state’s fiscal year, which began July 1. The year-to-date In the first nine months of this fiscal year, individual monthly withholding has increased 9. 9 percent over the same period in the last fiscal year.
Corporate income taxes in March were $ 49 million, a decrease of $ 12. 6 million, or 20. 5 percent, over the same month last year. That’s $ 6. 2 million, or 11. 2 percent, below the forecast.
State officials have said corporate income taxes fluctuate widely from month to month. The totals often depend on corporations’ federal income tax strategies, the state says.
For March, gross receipts collections totaled $ 178. 1 million. That was a $ 2. 3 million (1. 3 percent ) decrease from the same month last year. The total was $ 3 million (1. 7 percent ) above the forecast. The decrease largely net was $ 3. 190 billion, a $ 48. 9 million (1. 6 percent ) increase over the same period last fiscal year. That’s $ 145. 4 million (4. 8 percent ) above the forecast.
The year-to-date net is above forecast primarily because of gains in individual and corporate income tax collections beyond the forecast, the state reported.
Richard Wilson, assistant director of research for the Bureau of Legislative Research, said he expects the state to have a surplus of at least $ 155 million at the end of this fiscal year on June 30.
The finance department’s forecast “showed all the slowdown” in the current fiscal year and “all the recovery” in the next, he said.
“It could be that it lags into” next fiscal year, “so we can kind of smooth that valley and peak,” Wilson said. “So it could be that surplus you realize this year, you could use some of that to cover any deficit next year.” Gains in individual income tax collections are “what’s driving this surplus that we are seeing this year,” he said.
Year-to-date gross receipts totaled $ 1. 595 billion, a $ 52. 8 million (3. 2 percent ) decrease from the same period in the last fiscal year. That’s $ 1. 1 million (0. 1 percent ) more than forecast.
Year-to-date corporate income taxes totaled $ 252. 3 million, an increase of $ 1. 7 million (0. 7 percent ) above the same period in the last fiscal year. That’s $ 26. 5 million (11. 7 percent ) above the forecast.
Elsewhere, state government finances are weakening across the nation. Some states are collecting less revenue than projected and others are worried about that possibility, according to a report issued by the National Conference of State Legislatures.
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