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State tax officials said Tuesday that Arkansas’ July net available general revenue was $665.9 million, up 43.9% from the same month last year and 8.6% above forecast.
The fiscal year began July 1.
All major categories of revenue collections in July were above forecast and up from the year before. The forecast had been revised on March 23 because of the COVID-19 pandemic. But it was revised again, on June 30, up by $240 million.
John Shelnutt, the state’s economic forecaster, called the report “stunning.”
“We were warning of a possible drop below forecast in July because of what we tracked in income tax over the final quarter of the previous fiscal year, April through June, compared to our assumptions,” he said.
“That mainly comes down to the due date shift for income tax filing for individuals from April over to July. And we saw payments in April, May and June that were contrary to our assumptions. We thought those payments would all move over to July, and not be paid early,” he continued. “We also saw claims for refunds stall out in April and May, and it became a concern that those would be filed in the new fiscal year, in July, and harm the net results in July. So we did get some of that pattern, just nowhere near as bad as we feared.”
There were fewer returns filed and more refunds issued, but the negative impact on the state’s revenue was almost $74 million, not the $170 million state officials expected.
But Shelnutt also had a warning.
“This income tax story is really for tax year 2019, which is pre-pandemic, and it turns out that it was a very good year for incomes,” he said.
He said Arkansas may not see such good news this time next year because many people may have less tax liability due to the pandemic. Regardless, the state is now past the main concern it had for this fiscal year, Shelnutt said. It is also braced for a “double dip” in the economy as the effects of the federal stimulus package fade away, he said.
Shelnutt credited that federal stimulus package — including an additional $600 in weekly unemployment benefits and the $1,200 checks many people received — for increasing spending over last year. He noted an increase in local spending as well; people didn’t travel as much over this summer due to the pandemic.
Shelnutt added that uncertainty still abounds because factors such as payroll withholding are no longer a reliable indicator of how the economy is doing.