(May 2026) One sentence in an annual state report explains how policymakers have achieved a serious fiscal goal: reduction of the top state individual income tax rate under three governors and a succession of Republican legislatures.
“(Arkansas) revenues are expanding because the business cycle’s current state is expansion, not contraction.” Policy Foundation research memo, Nov. 2012.
(May 2026) One sentence in an annual state report explains how policymakers have achieved a serious fiscal goal: reduction of the top state individual income tax rate under three governors and a succession of Republican legislatures. That sentence is found in the state Department of Finance and Administration’s (DFA) annual revenue summary, published each year in early July. It states:
“Revenues in excess of the fully funded general revenue budget provided a surplus of (fill-in the dollar amount).”
Surplus state revenues ranged from a $15.7 million trough (FY 2017) to a $1.628 billion peak (FY 2022). They allowed the top individual income tax rate to be reduced from 7.0% to 6.9% in 2013 under Democratic Gov. Mike Beebe and the first Republican-controlled legislature since Reconstruction. The top rate was reduced from 6.9% to 4.9% under Republican Asa Hutchinson (2015-2023), and from 4.9% to 3.7% under Republican Gov. Sarah Huckabee Sanders (2023).
Surplus revenues have defied critics who argue tax cuts reduce state revenues, endangering programs. These tax cuts have also included reductions in corporate income tax rates championed by the Arkansas State Chamber of Commerce. Public records show DFA collected more individual and corporate income tax revenues in FY 2025-after 12 years of tax cuts-than in FY 2013.
FY 2013: $3.01 billion FY 2025: $3.52 billion
(Source: “Arkansas Comprehensive Annual Financial Report, FY Ended June 30, 2013,” pg. 38, and “Arkansas Comprehensive Annual Financial Report, FY Ended June 30, 2025,” pg. 34. “Revenues By Source: Personal and corporate income tax.”)
Surplus Revenues and the Business Cycle
Policy Foundation research has found that Arkansas state revenues tend to follow the U.S. business cycle, with a slight lag. State revenues tend to increase in economic expansions, and decrease or grow below trend around recessions.
A 2023 Foundation memo noted “national economic expansions tend to produce state revenue surpluses.” It’s unsurprising the state of Arkansas collects more tax revenues when economic conditions are favorable, and vice-versa.
The National Bureau of Economic Research (NBER), a Cambridge, Massachusetts nonprofit founded in 1920 is widely recognized within the economics profession and financial markets as the U.S. business cycle arbiter. The NBER’s business cycle chronology shows there was only one recession since the state tax cuts began, a two-month contraction from February to April 2020.
State revenues showed a modest decline around this recession. A mid-2020 Arkansas Democrat-Gazette article noted, “Tax receipts for the last four months of fiscal 2020 were affected by the economic downturn resulting from the coronavirus pandemic, which began in March. The forecast was revised twice – down (in March) but raised again (June 30) when revenue came in better than expected.” Revenues expanded with the economy after the recession ended and DFA recorded surplus revenues in FY 2020. There is a business cycle and at a future date the U.S. economy will enter a recession, affecting revenues.
The Great Recession and State Revenues
A recession’s effect on state revenues is illustrated by the December 2007-to-June 2009 contraction in the NBER chronology. It has been termed ‘the Great Recession.’ The state’s FY 2008 financial report forecast a FY 2009 “decrease of $118.2 million or 2.6 percent.” A year later, the state’s FY 2009 report noted, “Personal and corporate income tax revenue decreased by $95 million due to decline in personal income as a result of economic and market downturns.”
Surplus Revenues in the Income Tax Cut Era
The following chart shows surplus revenues in the income tax cut era that started in 2013. The surplus for FY 2026, which ends next month (June 30) should be announced in DFA’s annual revenue summary released in early July.
FY 2026 To Be Determined
FY 2025 $367,900,000
FY 2024 $698,400,000
FY 2023 $1,161,000,000
FY 2022 $1,628,000,000
FY 2021 $945,700,000
FY 2020 $369,000,000
FY 2019 $295,400,000
FY 2018 $41,700,000
FY 2017 $15,700,000
FY 2016 $177,400,000
FY 2015 $191,600,000
FY 2014 $78,700,000
FY 2013 $299,500,000
–Greg Kaza
Sources
Arkansas Democrat-Gazette. “General-revenue collections down for June in state: Still, amount above forecast.” Michael R. Wickline. July 3, 2020
Arkansas Department of Finance and Administration (DFA): “Fiscal Year 2025 Revenue Summary,” July 2, 2025
DFA: “Fiscal Year 2024 Revenue Summary,” July 2, 2024
DFA: “Fiscal Year 2023 Revenue Summary,” July 5, 2023
DFA: “Fiscal Year 2022 Revenue Summary,” July 5, 2022
DFA: “Fiscal Year 2021 Revenue Summary,” July 2, 2021
DFA: “Fiscal Year 2020 Revenue Summary,” July 2, 2020
“Arkansas Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2019,” pg. 13
DFA: “Fiscal Year 2018 Revenue Summary,” July 3, 2018
DFA: “Fiscal Year 2017 Revenue Summary,” July 5, 2017
“Arkansas Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2016,” pg. 13
DFA: “Fiscal Year 2015 Revenue Summary,” July 2, 2015
“Arkansas Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2014,” pg. 13
DFA: “Fiscal Year 2013 Revenue Summary,” July 2, 2013
“Arkansas Comprehensive Annual Financial Report, FY Ended June 30, 2013,” pg. 38
(Revenues By Source: Personal and corporate income tax)
“Arkansas Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2025,” pg. 34
(Revenues By Source: Personal and corporate income tax)
Arkansas Policy Foundation research memo, “Economic Expansions Tend to Produce State Revenue Surpluses” (July 2023)
National Bureau of Economic Research. www.nber.org
Note: Arkansas comprehensive annual financial reports for most of the 21st century can be found at the following link:
