State revenue continues above forecast, but with cautions | Arkansas Blog

Tuesday, February 4, 2014

State revenue continues above forecast, but with cautions

Posted By on Tue, Feb 4, 2014 at 9:45 AM

The monthly state revenue report for January showed net income a bit above forecast, 1.6 percent, but you can see from the discussion that it falls short of results to cheer about. Nonethless, the state is seven months into the fiscal year with almost $40 million in excess of budget. Lots of politicians with ideas on how to spend THAT, whether through tax cuts or public benefits.

The discussion on this month's report

January Net Available General Revenues total $483.6 million, $32.5 million or -6.3 percent below last year and $7.4 million or 1.6 percent above forecast.

Three factors significantly impacted revenue results in January compared to forecast and year ago results. These factors were Individual refunds, Sales taxes, and Individual Estimated payments.

Individual Refunds

Results in January were significantly impacted by a second year of delayed start to the income tax filing season by the IRS intake process as a result of the government shutdown. Our electronic process for refunds in Arkansas is tied to the federal system. The monthly forecast assumed a return to normal processing pattern for the federal and state returns this year after prior year delays caused by late changes to the tax code. Consequently, refunds were 45.6 percent below forecast this month. We expect refund processing to catch up with projections since federal filing has begun.

Sales and Use Tax

Sales and Use tax represented the major drag on collections in January. Collection growth was only 0.2 percent compared to year ago and 4.0 percent below forecast. Weaker than expected retail sales to consumers accounted for this result.

Individual Estimated Payments

Monthly results also reflect double-digit declines versus year ago payments in Individual Estimated Income tax. This result reflects the offset of early payments last year from taxpayers avoiding higher federal rates this year. The forecast adequately accounted for this drop in current collections. Better than expected payroll withholding also aided the results.

Corporate income tax

Among other revenue categories, corporate Income tax was above forecast by 11.2 percent and above year ago levels by 10.9 percent.




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