Top budget officials still undecided on tax cuts

Economists, DOR projecting modest state revenue growth

STATE REVENUES are expected to rise slightly in the coming fiscal year, but top budget officials from the Legislature and Healey administration say it’s still unclear whether there is enough money to enact permanent tax cuts.

At the end of last year’s legislative session, former governor Charles Baker and Senate leaders wanted to press ahead with $500 million in permanent tax cuts in addition to nearly $3 billion in one-time refunds from the state’s tax cap law.

House leaders balked at the permanent tax cuts, saying it was unclear whether the state could afford them, given rising economic uncertainty and after returning the $3 billion in tax refunds. Gov. Maura Healey has suggested permanent tax cuts are a priority for her.

At a consensus revenue hearing on Tuesday on Beacon Hill, economists and officials from the Department of Revenue projected tax income would slightly exceed the revenue forecast for the current year while coming in below last year’s record-setting pace. For fiscal 2024, which begins in July, most economists were forecasting revenues to increase slightly over fiscal 2023.

Top budget leaders in the Legislature and in Healey’s administration said the state is in reasonably good shape assuming the predictions of modest revenue growth are accurate, but they weren’t committing to a tax cut package.

Matthew Gorzkowicz, Healey’s secretary of administration and finance, said he will work with House and Senate budget officials to reach a consensus revenue estimate for fiscal 2023 and 2024. “With that,” he said, “we’ll have a discussion about the affordability of any tax package based on future tax revenues.”

Rep. Aaron Michlewitz of Boston, the chair of the House Ways and Means Committee, said there are revenue concerns looking to the future but permanent tax cuts remain a possibility.

“That conversation is still being had,” he said. “That is not off the table.”

Sen. Michael Rodrigues of Westport, the chair of the Senate Ways and Means Committee, was a bit more emphatic that he wanted to push for permanent tax relief but offered no assurances.

Both Rodrigues and Michlewitz said they would be interested in revising the 1986 tax cap law, which was triggered last year for only the second time since 1987.

Rodrigues said the 1986 voter-approved law could use some updating, while Michlewitz said he would like to see excess tax revenue in the future returned to taxpayers in a more equitable manner. Tax cap refunds last year were based on how much taxes the taxpayer paid.

The economists who testified at the hearing said it was unlikely the tax cap would be triggered in the next few years. Rodrigues called it an anomaly unlikely to be repeated any time soon.

“I think we are more interested in looking at continuing the conversation from last year about providing permanent tax relief to the citizens of the Commonwealth in the most progressive manner possible as opposed to spending a lot of time talking on a one-time anomaly of a tax refund,” he said.