Expected income tax revenue declines from tax cuts approved in 2024 have resulted in a 2.6% dip in Arkansas’ tax revenue through February, with the state collecting $138.1 million less than in the same period of the previous fiscal year.
Arkansas’ fiscal year-to-date (July 2024-February 2025) tax revenue is $5.273 billion, down 2.6% compared with the same period in the previous fiscal year, according to Tuesday’s (March 4) report from the Arkansas Department of Finance and Administration (DFA). The revenue is 1.4% above the budget forecast.
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%.
Income tax revenue in the first eight months was $2.017 billion, down 2.9% compared with the same period in the previous fiscal year and 2.8% above the forecast. Sales tax revenue was $2.341 billion, up 1.6% compared with the same period in the previous fiscal year and 1.1% above the forecast. Corporate income tax revenue was $294.6 million, $112.2 million below the same period in the previous fiscal year and $15.1 million below the forecast.
FEBRUARY REVENUE
Total revenue in February was $577.5 million, 4.8% above February 2024, and 5% above the budget estimate. February income tax revenue was $270.4 million, up 10% compared with February 2024 and 3.7% above the budget forecast.
“Collections increased by $24.6 million, or 10.0 percent compared to last year reflecting the upward impact of additional paydays on withholding collections,” the DFA noted in its report.
February sales tax revenue was $273.6 million, up 6% compared with February 2024, and 10.5% above the budget estimate. Corporate income tax revenue in February was $2.1 million, down $12.5 million compared with February 2024 and $8 million below the budget estimate.
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-February 2025: $123.3 million
July 2023-February 2024: $130.1 million
Insurance
July 2024-February 2025: $67.4 million
July 2023-February 2024: $61.6 million
Alcoholic beverages
July 2024-February 2025: $49.5 million
July 2023-February 2024: $49.3 million
Games of skill
July 2024-February 2025: $37.6 million
July 2023-February 2024: $35.4 million
Severance
July 2024-February 2025: $7.7 million
July 2023-February 2024: $8.4 million