DALLAS – Arkansas revenues missed projections by 1.7% in the first month of the fiscal year as sales tax and corporate income tax collections weakened, officials said.
At $467.8 million, July revenues were up $1.4 million compared to the same month last year but $7 million below forecast, according to the state Department of Finance and Administration.
John Shelnutt, head of economic analysis and tax research for the state, said that sales tax and corporate income tax receipts came in below projections. Individual income tax revenue came in above forecast.
Sales and use taxes were 4.4% lower than forecast, Shelnutt reported.
The shortfall comes after Arkansas ended the 2016 fiscal year June 30 with a $177 million surplus.
Arkansas has enjoyed revenues above projections as neighboring states of Oklahoma and Kansas have coped with severe shortfalls over the past year.
Like those two states, Arkansas continued cutting taxes as the region's economy weakened. To compensate for falling income tax revenue, Kansas lawmakers passed a sales tax increase last year.
Like Kansas Gov. Sam Brownback, Arkansas Gov. Asa Hutchinson touts the tax cuts as an economic stimulus. In a recent radio address, Hutchinson said the tax cuts were targeted for maximum impact.
"One of the first steps I took upon being elected Governor was to sign the largest middle class tax cut in Arkansas' history," Hutchinson said. "This tax cut affected what I like to call the 'sweet spot' of the state's economy by easing the burden on individuals making between $21,000 and $75,000 a year."
Opponents of tax cuts often cite the opinion that cutting taxes will reduce the government revenue base and hinder its ability to fund services, Hutchinson said.
"Even with the impact from $100 million in tax cuts, net revenue from the state income tax grew by 4.4% over last year's collections," Hutchinson said after the June revenue report was posted. "Reducing the state income tax rate to a more competitive level is a key component of our economic development plan."