UPDATE Sales tax collections sag in December


LITTLE ROCK — Two extra work days in December helped push tax collections above forecast for the last month in 2012, but sales taxes lagged in December, the state fiscal office reported Thursday.

Net available income totaled $456.5 million in December, $17.5 million or 4 percent above the monthly forecast and $37.8 million, or 9 percent, above December 2011, according to the state Department of Finance and Administration report.

Officials said the results were driven mainly by individual income tax collections which grew 17.4 percent compared to a year ago. Payroll timing shifts accounted for much of the gain, as reflected in a 19.6 percent jump in withholding over December 2011, DF&A said.

Individual income tax collections were $243.0 million for the month, an increase of $36.1 million compared to last year and $20.1 million above the December forecast.

December sales and use taxes totaling $180.9 million were $4.4 million, or 2.5 percent, above December 2011 but fell 1.6 percent, or about $2.9 million, below the monthly forecast.

DF&A Director Richard Weiss said the decrease was indicative of a still struggling economy.

“It shows that our economy is continuing to improve, but very slowly,” Weiss said.

Weiss said he expects the big jump in income tax withholding to even out in January.

Meanwhile, corporate income tax collections underperformed in December. The $62.8 million total fell 5.9 percent below the December 2011 total and 9.2 percent below the monthly forecast, DF&A said.

Gov. Mike Beebe said he was pleased with the revenue report but warned not to be too excited.

“It’s up significantly over last year, but not significantly over forecast,” he said. “It’s a good month but you know we have bad months. It appears to be on track.”

The December revenue report was the last before the Legislature convenes on Jan. 14 for this year’s regular session. The Legislature uses the monthly revenue report to gauge the condition of the state’s economy, and in November the governor revised upward by 2.1 percent the forecast for the rest of the fiscal year, which would bring in about $100 million in additional funding for the current year.

The governor also presented his proposed $4.9 billion general revenue budget for the 2014 fiscal year that begins July 1, which includes a further reduction in the state sales tax on groceries that would be contingent upon a decline in the state’s budget obligations.

Under the proposed budget, the sales tax on groceries would be reduced from 1 1/2 cents to one-eighth of a cent per dollar spent. The reduction would be triggered when certain budget obligations, including desegregation payments to three Pulaski County school districts and payments on certain bonds, decline by at least $35 million for six consecutive months.

The grocery tax was 6 percent when Beebe took office in 2007. He successfully has pushed for gradual decreases in the tax during each regular session. His new proposal would eliminate the tax except for a portion that can be changed only by amending the state constitution.

Some in the Legislature have said they would like to consider other tax reductions, such as lowering the state income tax or reducing taxes on manufacturers.

The governor said he would have liked his grocery tax cut proposal to be immediate, but the state’s budget can’t stand any such cuts at this time.

“If I could get rid of it all right now I would have proposed it, but in good conscience I don’t know how you get rid of the rest of it right now with a projected $139 million Medicaid shortfall,” he said. “If I can’t even do my favorite (tax cut), how in the heck do I do others?

“We (cut taxes) with reason, and with the projected budget shortfall right now, with Medicaid it’s very difficult,” he said.