State revenues keep on surpassing projections
Rise in funds comes with billions in federal aid on the way
STATE HOUSE NEWS SERVICE
THE DEPARTMENT OF REVENUE collected more than $3 billion from Massachusetts residents, workers, and businesses last month, once again shattering the Baker administration’s expectations and putting the state’s coffers more than $1.5 billion ahead of where they were at the same time last year.
Revenue collections for March added up to a total of $3.061 billion — $402 million, or 15.1 percent, more than what was collected in March 2020 and $648 million or 26.8 percent more than what the Baker administration was expecting to collect last month.
Now nine months through fiscal year 2021, Massachusetts state government has collected $22.588 billion in taxes from people and businesses, which is $1.524 billion, or 7.2 percent, more than it did during the same nine mostly pre-pandemic months of fiscal year 2020. The last month Massachusetts saw a year-over-year decline in tax collections was September.
For the last three months, actual tax collections have blown the Department of Revenue’s monthly benchmarks out of the water. January collections beat the benchmark by 14.7 percent, February collections surpassed the benchmark by 24.8 percent, and now March revenues came in 26.8 percent over expectations.
If collections come in at exactly the DOR benchmarks for April, May, and June, Massachusetts will have collected $30.539 billion in tax revenue in fiscal year 2021.
That would be $1.45 billion more than what the Baker administration projected it would collect this fiscal year when it last updated its expectations, $943 million or 3.1 percent more than what was collected during fiscal year 2020, and about $419 million more than the consensus revenue agreement being used to build the forthcoming fiscal year 2022 budget.
The over-benchmark collections, if they hold up, could lead to a significant surplus at the end of fiscal 2021 this summer, which would come just as state officials are making decisions about how to spend billions of dollars in federal aid coming as part of the American Rescue Plan. Budget writers in the Legislature and the Baker administration have expressed interest in using available revenues to limit rainy day fund draws.
The good news on the tax revenue front comes as Business confidence in Massachusetts surged to an outright enthusiastic level in March, buoyed by COVID-19 vaccination progress and the final passage of the $1.9 trillion federal spending law.
The Associated Industries of Massachusetts’ monthly confidence index shot up by 4.5 points last month, capping a gain of 11.6 points since December. At 60.9 on a scale of 0 to 100, the index now rests comfortably in positive territory heading into the spring, marking a complete reversal from a year ago.
While the state’s unemployment rate remains elevated at 7.1 percent, employers in recent months have continued to add jobs and appear more bullish about economic and vaccination prospects than they are bearish about the ongoing uptick in virus cases, according to the survey of about 140 employers.
DOR considers March a “mid-size month” for tax collections, usually ranking sixth out of the 12 months. The agency said all income tax collections for March came in $178 million above benchmark, sales and use taxes were $95 million over benchmark, corporate and business taxes ended up $274 million above benchmark and the ‘all other’ category finished the month $101 million ahead of expectations, according to DOR.
“March revenue included increases in withholding and nonwithheld income taxes, corporate and business taxes, ‘all other tax,’ and sales and use taxes. Although C corporation returns are not due until April 15th, some corporate return payments were received in March, resulting in an increase in that category relative to the benchmark and prior year collections. The increase in ‘all other tax’ is primarily attributable to estate taxes, a category that tends to fluctuate,” Revenue Commissioner Geoffrey Snyder said.
“Income tax refunds are below benchmark due to the late start of the tax filing season and recent tax law changes, including the extensions of the state and federal individual income tax filing deadlines from April 15 to May 17. However, those tax refunds may catch up as the filing season progresses.”DOR last month announced that it had moved the state tax filing deadline for individuals to May 17 to comport with the federal deadline, which could necessitate adjustments to the agency’s monthly estimates and benchmarks — or perhaps another adjustment to the underlying revenue assumption for the fiscal year that ends June 30.
Michael Norton contributed to this report.