Arkansas on track for tax revenue surplus of $214.8 million

Arkansas tax revenue is down $372.7 million in the first 11 months of the fiscal year, but the almost 5% decline is 0.3% above the budget forecast. The state’s sales tax revenue is the only large revenue category outpacing collections compared with the previous fiscal year.

Arkansas’ fiscal year-to-date (July 2024-May 2025) tax revenue is $7.437 billion, down 4.8% compared with the same period in the previous fiscal year, according to Tuesday’s (June 3) report from the Arkansas Department of Finance and Administration (DFA). The revenue is 0.3% above the budget forecast.

Income tax revenue in the first 11 months was $3.295 billion, down 6.2% compared with the same period in the previous fiscal year and 0.3% above the forecast. Sales tax revenue was $3.221 billion, up 1.1% compared with the same period in the previous fiscal year, and 0.2% above the forecast. Corporate income tax revenue was $447.2 million, $194.4 million below the same period in the previous fiscal year, but 1.2% above the forecast.

In the report, DFA officials said the overall revenue decline is primarily attributable to lower income tax rates, and that “a significant level of individual and corporate income tax payments normally made in May and June are delayed until July 31 because of the extension of filing and payment deadlines following severe storms.”

Legislators in a 2024 special session voted to reduce the top personal income tax rate from 4.4% to 3.9% and the top corporate income tax rate from 4.8% to 4.3%.

“Sales tax collection, a key economic indicator, surpassed forecast in May by $6.6 million and increased from last year by more than 5%,” DFA Secretary Jim Hudson said in a statement. “The revised forecast, which considers the severe weather-related filing extension, anticipates a year-end revenue surplus of $214.8 million.”

MAY REVENUE
Total revenue in May was $585.3 million, 1.9% below May 2024, and 4.5% above the budget estimate. May income tax revenue was $231.9 million, down 6.4% compared with May 2024 and 4.8% above the budget forecast.

May sales tax revenue was $301.5 million, up 5.5% compared with May 2024, and 2.2% above the budget estimate. Corporate income tax revenue in May was $14 million, down $11.9 million compared with May 2024 and $5.1 million above the budget estimate.

“Gains in Retail Trade, Utilities, Manufacturing, and Motor Vehicles more than offset smaller losses in other categories,” the DFA report noted about sales tax revenue.

The state ended the previous fiscal year with a $698.4 million surplus. The state ended the fiscal year before that with a $1.161 billion tax revenue surplus. The surplus of $1.161 billion was the third consecutive year of a surplus of near or more than $1 billion.

OTHER REVENUE SOURCES
Tobacco
July 2024-May 2025: $167.1 million
July 2023-May 2024: $177.4 million

Insurance
July 2024-May 2025: $97.9 million
July 2023-May 2024: $90.1 million

Alcoholic beverages
July 2024-May 2025: $69.4 million
July 2023-May 2024: $69.4 million

Games of skill
July 2024-May 2025: $54.7 million
July 2023-May 2024: $52.4 million

Severance
July 2024-May 2025: $9.7 million
July 2023-May 2024: $10.9 million