State government

Despite pandemic, state tax revenues hold steady

Revenues for 1st two months of fiscal year up 3.1%

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DESPITE A PANDEMIC and record unemployment, Massachusetts tax revenues in August continued to hold fairly steady compared to last year.

The Massachusetts Department of Revenue reported on Friday that an apples-to-apples comparison shows tax revenues in August 2020 were down only $7 million, or .4 percent, compared to the same month a year ago.

For July and August, the first two months of fiscal 2021, revenues were actually up by $124 million, or 3.1 percent, compared to the same period a year ago.

The apples-to-apples approach is required because the state’s tax filing date for 2019 was postponed from April 15 to July 15 this year because of COVID-19. That delay meant a lot of revenue that normally would have come into state coffers in fiscal 2020 actually arrived in fiscal 2021. The Revenue Department separated out what it considered fiscal 2020 money from fiscal 2021 money, yielding the apples-to-apples comparison.

The revenue report indicates withholding taxes, which are taken out of paychecks as well as unemployment insurance payments and are the largest source of state tax revenue, increased 8 percent, or $83 million, in August. Sales tax revenues increased 8.3 percent in August and taxes on motor vehicle sales went up 5 percent.

All other types of taxes – on meals, corporations, and businesses – declined in August. Meals taxes in August were $78 million, down $36 million, or 31 percent, from August 2019.

The Legislature has passed and the governor has signed a temporary spending plan that will run through October that mirrors the spending plan from last year. Revenues for July and August suggest that the state is currently receiving enough revenue to cover the expenditures required under that repeat of the fiscal 2020 budget.

State officials said $13 million in tax revenue was collected in August that will be applied to the previous fiscal year because of the shift in tax-payment dates. In July, $2.3 billion collected during the month was applied to the previous fiscal year. With those infusions, the state appears to have ended fiscal 2020 on June 30 with a revenue shortfall of $708 million.

It’s unclear how big the actual state deficit is for fiscal 2020, but officials can draw on a $3.5 billion rainy day fund to help close it.

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About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Budget officials have been warning of a budget shortfall of as much as $7 billion during the current fiscal year, which began on July 1. Gov. Charlie Baker recently cautioned about reading too much into the surprising July numbers, which were largely duplicated in August.

“If you’re asking me if I’m drawing lots of conclusions about what fiscal 2021 is going to look like based on July numbers, the answer to that is no,” he said. “We were pleasantly surprised by the withholding and the sales numbers, but let’s face it, there’s still a lot of challenges associated with our economy out there. It’s going to be a tough year.”

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