Make it seven months.
Having already made mid-year price range cuts and dimmed the outlook for tax collections by June based mostly on six consecutive months of underwhelming receipts, the state reported Monday that tax income got here in beneath even downgraded expectations throughout January and that year-to-date income collections now path precise collections from the identical portion of final price range yr.
The Department of Revenue reported accumulating $3.594 billion final month — $268 million or 6.9% lower than precise collections in January 2023 and $263 million or 6.8% beneath the administration’s revised month-to-month benchmark of $3.858 billion.
The Healey administration final month lowered the month-to-month benchmark for January from the $4.121 billion it projected for the month previous to the governor’s fiscal yr 2024 changes.
MassFiscal, a conservative watchdog, mentioned the millionaire’s tax shouldn’t be working.
“Gov. Maura Healey is dealing with an economy she helped create. It’s safe to say the income surtax is driving wealth and resources out of the state,” mentioned Paul Craney, MassFiscal’s spokesman. “The poor decision to endorse a ballot question that wrote into the state constitution an 80% income tax hike on some high-income earners, small business owners, home sales, and retirees is having a devastating impact.”
Since fiscal yr 2024 began in July, DOR has collected $21.460 billion, which is $212 million or 1 % lower than precise collections in the identical interval of fiscal 2023 and $263 million or 1.2 % lower than what the Healey administration projected final month that it could have hauled in by this level within the calendar.
“January collections decreased in income tax withholding, non-withheld income tax, corporate and business tax, and ‘all other’ tax in comparison to January 2023,” Revenue Commissioner Geoffrey Snyder mentioned. “These decreases were partially offset by an increase in sales and use tax. The decrease in non-withheld income tax was driven by lower income tax estimated and return payments and an unfavorable increase in income tax refunds. The decrease in withholding was mainly due to typical timing factors in collections. The decrease in corporate and business tax was due to an increase in corporate refunds and a decrease in corporate estimated and return payments. The decrease in ‘all other’ tax is mostly attributable to a decrease in estate tax, a category that tends to fluctuate.”
With tax revenues operating $769 million behind projections after December, the Healey administration final month slashed the year-end income estimate by $1 billion. Reducing the income estimate by $1 billion was meant to handle the present $769 million shortfall whereas additionally offering some respiratory room for the second half of the price range yr, when Administration and Finance Secretary Matthew Gorzkowicz mentioned he anticipated further months of below-benchmark collections. The administration additionally mentioned it thought its January actions could be sufficient to keep away from additional 9C cuts this yr.
Now, after the governor minimize $375 million in spending and newly tapped $625 million in non-tax revenues to account for the $1 billion income downgrade, the state nonetheless finds itself in a gap.
The Executive Office of Administration and Finance mentioned the administration was not making any further price range strikes in tandem with the below-benchmark January income report.
January is the beginning of a vital six-month interval for the state’s coffers. Collections usually are not cut up evenly throughout the 12 months and the second half of the fiscal yr (January by June) usually produces about 60 % of the state’s annual tax income, officers have mentioned. The second half of the price range yr additionally tends to be extra unstable for tax collections.
Last yr, the top of the Massachusetts Taxpayers Foundation urged a cautious method to the top of the price range yr as a result of “we know from long history that what happens in the first six months of a fiscal year doesn’t often have a lot to do with what happens in the second six months.”
One issue that would work within the state’s favor is the relative power of the U.S. economic system, which grew at a sooner clip than anticipated within the second half of 2023. And with inflation beginning to fall again to Earth and the inventory market acting at or close to document ranges, there’s a glimmer of optimism from the economic system at giant.
When Gov. Maura Healey made price range cuts final month, Gorzkowicz additionally decreased the fiscal yr 2024 income estimate by $1 billion, from the $41.41 billion determine that he and key lawmakers agreed a yr in the past to $40.41 billion. Backing out $1 billion in income from the surtax on family revenue above $1 million put the revised non-surtax income estimate at $39.41 billion.
Since then, the year-end income assumption has been additional diminished by about $577 million to settle at $38.834 billion (or $39.834 billion if counting surtax income), DOR mentioned. The change is supposed to replicate the affect of the tax reduction package deal that Healey signed in October, a regulation that takes an roughly $576.8 million chunk out of fiscal 2024 revenues.
This yr’s prices of the package deal have been absolutely lined within the price range, however the year-end tax income benchmark had not beforehand been adjusted to replicate its passage, DOR and the Mass. Taxpayers Foundation mentioned.
DOR is because of report income collections for February, the least vital month remaining in fiscal yr 2024, by Tuesday, March 5. The month-to-month benchmark for February is about at $2.018 billion, or $38 million greater than what was collected in February 2023.