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Arkansas PoliticsBigger GovernmentReadTaxes/Government SpendingUncategorized

High Taxes, High Spending, But Only Meager Relief

By Conduit For Action

Arkansas’ surplus general revenue collections for one year was almost a BILLION DOLLARS. Having a surplus is not unusual but you need to see how collections are growing and growing.

High tax collections bring a big temptation to spend our tax money on non-essential items and means there is little interest in making sure state agencies spend our money wisely. It also means big corporations keep lining up for state government grants and incentives while small businesses and individuals pay the bills.

Despite the high collections and despite Arkansas being a high tax state, there is not much tax relief being offered.  Governor Asa Hutchinson plans to call a special session of the legislature later this year for an income tax cut. But, Hutchinson’s plan is to reduce ONLY the rate applying to the top income bracket, not all the brackets, and he ONLY wants to reduce the rate on the top bracket by 0.2% (from 5.9% to 5.7%).

Hutchinson’s weak proposal is little more than a political stunt to help politicians check off a tax relief box ahead of the elections while keeping Arkansas a high tax state. Arkansans need major tax relief.

Let’s take a look at some facts about the state budget, surplus revenue, and Arkansas’ high tax rates. There is a lot of detail in what follows so feel free to skim around through the report. It is detailed because you need to see what the politicians are doing.



  • Nearly a Billion dollars in surplus general revenue for FY 2021. – The surplus for Fiscal Year 2021, which ended on June 30 was $946 million.[i] (A fiscal year begins on July 1 and ends June 30 the following year.)
  • Part of the record surplus is due to the delayed deadline for filing the 2020 individual income tax returns which put some collections into the 2021 FY, but that doesn’t fully explain the much higher revenue collections. In 2020 the deadline for filing income taxes was delayed for a few months due to the pandemic. The delay caused some income tax collections to be delayed from FY 2020 to FY 2021 since the fiscal year changes on July 1.

How does the 2021 general revenue surplus compare to previous years? Arkansas normally has a general revenue surplus. To see a surplus prior to the pandemic, consider FY 2019 which had a general revenue surplus of $295.4 million. But the 2019 total was only the fifth largest in thirty years. The highest general revenue surplus prior to FY 2021 was $409.3 million in FY 2007.[ii]

  • But what about the 2020 FY which ended June 31, 2020? Fiscal Year 2020 was expected to be terrible because of the expected effect of the pandemic on the economy. You will recall (1) factories were shutting down or running at lower capacity because of workers getting COVID-19, (2) Governor Asa Hutchinson shut down some businesses and limited indoor gatherings, and (3) the deadline for filing individual income taxes was delayed which meant many people did not file until after the 2020 fiscal year ended on June 31, 2020.

    Despite all these factors general revenue collections in FY 2020 did well. There wasn’t a surplus for 2020 but net general revenue available to state agencies in fiscal 2020 dropped only by $168.1 million, or only 2.8%, below fiscal 2019 to $5.75 billion, yet exceeded the March 23 forecast by $369.4 million or 6.9%.[iii]

    Individual income tax collections were down in FY 2020 because the filing deadline had been extended, meaning some 2020 collections did not happen until after the end of the 2020 fiscal year. But collections of sales and use tax was way up.

    Sales and use tax collections in fiscal 2020 increased by $78.7 million, or 3.2%, over fiscal 2019 to $2.5 billion, and exceeded the March 23 forecast by $29.1 million, or 1.2%. The recent internet sales tax appears to have been a big factor.


  • Having a surplus is a good thing to cover bad times but there have been times politicians have used surplus as one-time fun money. Too often surplus general revenue has been treated as fun money and spent in the following fiscal year. This has been both by transferring funds to a specific purpose through specific legislation and though discretionary spending funds. Perhaps the biggest examples of treating the surplus as fun money have come though the Rainy Day Fund which allowed the Governor to spend money for any purpose if approved by the Legislative Council which is a committee of Senators and Representatives. The Rainy Day Fund is being repealed effective December 31, 2022.[iv] Even surplus transferred to the Long Term Reserve Fund can be spent but requires approval of two-thirds of the members of the Legislative Council.[v]


  • Highest August collections on record. Arkansas’ gross general-revenue tax collection in August of $588.6 million was the highest collection on record for the month of August. The previous record was $564.9 million in August 2020.[vi]
  • July/ August combined was down but exceeded the forecast by 9.5%, plus sales and use tax collections are up. The lower combined collections for July and August of 2021 are due to income tax collections. Sales and use taxes which show consumer spending were $516.6 million for the two months and exceeded July and August of last year by 9.3%.[vii]


General revenue is what politicians want you to focus on but there is much more spending by the state than just general revenues. According to the Bureau of Legislative Research, when general revenue expenditures were added to other expenditures the state spent $25.7 billion in FY 2019.

This is the breakdown of Arkansas revenue based on FY 2019 data:

Trust & other Funds – 30% ($7.7 billion)
Federal Funds – 30% ($7.8 billion)
General Revenues – 22% ($5.5 billion)
Special Revenues – 5% ($1.2 billion)
Cash Funds –12% ($3.1 billion)
State Central Services & Constitutional Officers Fund –1% ($0.3 billion)[viii]

  • Not just general revenues going up. For example, we referenced the 9.3% increase in sales taxes collections within general revenues, but the same increase would apply to sales taxes going to special revenues such as dedicated sales taxes for education, and highways and roads. The increase would probably be even higher for the 1/8th % sales tax divided primarily between Game & Fish and Parks & Tourism since that tax is also on groceries.

    There has been an increase in most of the sources of funds as shown by the following chart from the Bureau of Legislative Research covering FY 2015 to 2020.



[i] State Ends Fiscal Year With $946M Surplus, Above Forecast, Arkansas Business,

Jul. 2, 2021

[ii] Arkansas’ ’19 surplus 5th-largest in 30 years, Arkansas Democrat-Gazette, July 14, 2019

[iii] General-revenue collections down for June in state, Still, amount above forecast, Arkansas Democrat-Gazette, July 3, 2020

[iv] A.C.A. § 19-5-1262

[v] A.C.A. § 19-6-486

[vi] State revenue reaches a high of $588.6M; haul most ever for August, Arkansas Democrat-Gazette, September 3,2021

[vii] Arkansas tax revenue declines fiscal year-to-date, but 9.5% above forecast, Talk Business & Politics staff, Sept 2, 2021 (

[viii] Bureau of Legislative Research slide # 19 in
(NOTE: this link is a download)


[x]  2018 State Business Tax Climate Index by the Tax Foundation


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