DALLAS — Arkansas revenues ran 7% above forecast in February, keeping the state 2.9% above forecast for the fiscal year that began July 1, officials said.
The state Department of Finance and Administration said sales tax collections were higher than expected and individual income tax returns were lower than expected in February.
The $218.3 million of revenues recorded in February came as Gov. Asa Hutchinson signed into law a bill that lowers income taxes by about $100 million per year.
Senate Bill 6, signed into law Feb. 5, reduces the state income tax rate for people earning between $21,000 and $75,000 a year by 100 basis points compared to last year. People earning between $21,000 and $35,099 a year will pay 5% instead of 6%, and people earning between $35,100 and $75,000 a year will pay 6% instead of 7%.
"This is an encouraging first step in making Arkansas's income tax rates more competitive with surrounding states, which will only enhance our reputation as a state that is eager to attract and accommodate new jobs and businesses," Hutchinson said in a prepared statement. "Arkansas has been an island of high taxation for too long, and I'm pleased that we are doing something about that."
Before the tax cuts took effect, individual income tax collections last month totaled $210.5 million, which was down $16.2 million, or 7.2%, from a year ago and $17.4 million, or 7.6%, below forecast.
Corporate income tax collections for February totaled $4.3 million, which was down $1.2 million from a year ago and $1.4 million, or 24.1%, below forecast.
For the fiscal year to date, net available general revenues total $3.3 billion, which is $127.2 million, or 4%, above total revenues at this time last year and $94.6 million, or 2.9%, above forecast, officials said.
Along with income tax cuts for the middle class, SB 6 delays portions of an across-the-board income tax cut of 0.1% that the legislature approved in 2013 and partially repeals a capital gains income tax cut that lawmakers approved in the same year.
The capital gains tax cut from two years ago raised the tax exemption on capital gains from 30% to 50% and exempted all capital gains in excess of $10 million from the state income tax.
The state Senate amended SB 6 to repeal that tax cut to reduce the cost of the governor's tax-cut package, but House members balked and amended the bill to set the exemption on capital gains at 40%.
The tax-cut package had been estimated to cost $80.6 million a year, but the House amendment is estimated to add $9.7 million to the cost. Hutchinson said he is willing to adjust his proposed budget to include the increased cost.
With $1.7 billion of tax-supported debt, Arkansas carries general obligation bond ratings of AA from Standard & Poor's and Aa1 from Moody's Investors Service, with stable outlooks.