An inability to process tax returns plus higher tax rates in the new calendar year led state revenue to come in $61.3 million - or 13.5 percent - above the forecasted amount in January, the state finance department announced Monday.
State general revenue in January increased by $30.5 million - 5.5 percent - over the same month a year earlier to $583 million.
Last month’s overall collections exceeded the state’s forecast by $34.7 million, the state Department of Finance and Administration reported Monday in its monthly revenue report.
The total collected also represented a record for the month of January. The old record of $552.5 million was set the previous year, in 2011.
State Finance Director Richard Weiss said the $31.2 million (10.1 percent) increase in income tax collection in January was caused by an inability to issue tax refunds until about a week later than normal because of congressional wrangling over tax hikes and spending cuts.
“The whole thing really is about the fiscal cliff,” Weiss said.
Individual income taxes are made up of payroll withholdings, estimated payments and payments from income tax returns and extensions.
Weiss said the Internal Revenue Service wasn’t prepared to release tax returns in January because of uncertainty about how the tax code might change, and hadn’t authorized the states to do so either.
Weiss said the state Department of Finance and Administration had expected to refund $30 million in January, but couldn’t.
“We have a one-time blip that really drove the collections up,” he said.
Individual tax refunds totaled $10.3 million, which is $23.9 million or 69.8 percent below January 2012.
Gov. Mike Beebe cautioned that collection anomalies made the month look better than it was.
Beebe said the net amount available is “distorted because the [federal government] didn’t get their stuff together on what they were going to do on the fiscal cliff [and] what the tax code was going to look like and so everybody’s delayed being able to file returns on the [federal government]which automatically delays us too,” Beebe said. “So there haven’t been any refunds. They will be coming.”
He said the spike in the net available amount in January should be matched by a dropin what’s available in February’s report.
“People need to be aware of that. You’ll see a big reversal of those numbers in the coming months,” Beebe said.
Weiss said collections were also skewed by companies shifting income in 2012 so that the money would not be taxed at higher 2013 rates.
General revenue comes mainly from income and sales taxes. It amounts to about 20 percent of the state’s $25 billion-a-year budget, which includes federal funds, special revenue such as the gasoline tax, cash funds such as college tuition and fees and other money.
In the first seven months of fiscal 2013, which began July 1, gross general revenue totaled $3.4 billion. That is $120.9 million or 3.7 percent above the total general revenue collected in the first seven months of fiscal 2012.
Sales tax collections continue to be below forecast, coming in $1.8 million, or 1 percent less, than in January 2012. At $178.3 million for the month, sales tax collections were 5 percent below forecast.
Some sales taxes and other revenue collected during the holiday season and held up by the Christmas snowstorm didn’t arrive until January, so they’re included in the latest report.
Weiss said he doesn’t know what has caused the low sales tax collection, which has been below forecast in each of the first seven months of the fiscal year.
“We don’t have a real clear answer on [why],” he said. “It has been a problem just all through this recession.”
Beebe expressed concern about the sales tax collections.
“There’s a troubling statistic in there in that sales tax is not performing well. It’s been absolutely consistent, which means that people are still wary about spending money and people are still concerned about what their future might be, so there’s a caution there that affects the economy,” Beebe said.
According to the Finance Department, January’s general revenue included:
A $1.7 million (6.7 percent)increase in corporate income tax over the same month last year to $27.9 million.
A $55.2 million (12 percent) increase in net available revenue over January 2011 to $516.1 million, above the state forecast by $61.3 million (13.5 percent). The net available is the amount agencies are authorized to spend.
A $1.7 million increase (6.7 percent) in corporate income taxes over a year earlier to $27.9 million, which was $700,000 (2.5 percent) above the state’s forecast.
Corporate income taxes are a volatile source of revenue that often fluctuate on a monthly basis.
Gross general-revenue collections are reduced by refunds and about a dozen other reductions, leaving a “net” revenue that agencies spend.
During the first seven months of fiscal 2013, the net increased by $146 million (5.2 percent) over the same period in fiscal 2012 to $2.95 billion, the department reported. That’s $83.4 million (2.9 percent) above the Nov. 15 forecast.
Northwest Arkansas, Pages 7 on 02/05/2013