With tax revenues soaring, Spilka calls for relief package
Senate president offers no details, promises action before end of June
MASSACHUSETTS TAX revenues continued to soar in April, astonishing experts who track the numbers and prompting Senate President Karen Spilka to announce that she intends to push for some sort of tax relief package before the end of June.
April tax collections totaled $6.9 billion, up more than $3 billion compared to the same month a year ago and more than $2 billion ahead of the state’s revenue forecast for the month. Even after adjustments for an excise tax that is temporarily accelerating tax payments, revenues in April were up 77 percent from a year ago and 43 percent ahead of the state’s consensus revenue forecast, according to numbers released by the Department of Revenue on Wednesday.
Year to date, the state has taken in $34.5 billion in tax revenue, $8 billion, or 30 percent, more than last year, and $4 billion, or 14 percent, higher than what was forecast. Last year also saw major increases in tax revenue growth.
Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said the increase in revenue is something she hasn’t seen in her lifetime. “It is incredible,” she said.
“Post-pandemic madness continues to reign over state tax revenues,” he said. “The stable and reliable stuff, like income withholding and sales taxes, remain stable and reliable, 2 to 5 percent higher than anticipated for the year. But the volatile parts defy gravity, with revenue from corporate profits and capital gains way above expectation. As a forecaster, it’s hard to stomach but there’s no question state finances are in very good shape.”
Corporate and business tax collections totaled $690 million in April, a whopping $291 million, or 73 percent, above what was forecast.
McAnneny said inflation and labor shortages are pushing up wages and as they increase so do taxes on them. She said tax returns in April were accompanied by income tax levies on the receipt of dividends and capital gains from the sale of stock over the prior year.
The state also has a rainy day surplus fund approaching $6 billion and billions of federal dollars that have yet to be spent.
“Those numbers warrant some kind of tax relief,” said McAnneny.
Spilka late on Wednesday indicated she agrees. “In light of today’s news on revenues, I have asked Senate leaders to work with their partners in government to pursue a tax relief package for residents before the end of session,” Spilka said in a statement. “While the details remain to be worked out, I believe we can safely balance targeted spending investments to a number of crucial areas, such as housing, childcare, and higher education, with tax relief for individuals and families who are feeling the effects of inflation and continued economic disruption. I look forward to working with my colleagues in the Senate and our partners in the House after conclusion of the Senate budget to explore providing tax relief to the people of the Commonwealth.”
Until Spilka’s announcement, legislative leaders had not ruled out a tax relief package but had shown little interest in it. House Speaker Ron Mariano on several occasions indicated a tax relief package was not a high priority. Lawmakers rejected a gas tax holiday and asked for more time to study Gov. Charlie Baker’s proposed package of tax cuts. The governor’s $741 million tax relief package lowers estate and capital gains taxes and provides relief to renters and seniors who own homes.
Karissa Hand, a spokeswoman for the campaign of Maura Healey, said the attorney general favors a combination of tax relief and investments. “Many people across Massachusetts are struggling with high costs. Maura is going to prioritize investing in programs that will help reduce the high costs of housing, child care, energy, and transit that are impacting families. She supports tax relief as part of the solution, but believes it should be targeted in ways that make sense and that go to those who need it most,” Hand said.
With tax revenue currently running more than $4 billion ahead of consensus forecasts with two months remaining in the fiscal year, the issue of what to do with the surplus is likely to come to a head soon.The recently passed House budget did not adjust upward the revenue forecast, leaving that decision for later. Even so, the House budget boosted spending by more than $1.5 billion above what Baker had proposed in his spending plan in January. Roughly $600 million of the increase went for MassHealth, the state-federal health insurance program for the poor and elderly.
According to an analysis by the Massachusetts Taxpayers Foundation, the House budget includes $130 million added during floor debate. The money added on the House floor included $62 million for 617 earmarks for local projects and $68 million to boost spending in a number of areas — $40 million for nursing homes; $18 million for judicial pay raises; $2 million more (a 43 percent increase) for the Commonwealth Zoological Corporation, which oversees the Franklin Park and Stone Zoos; and $500,000 for three organizations that help people needing financial assistance in obtaining abortions.