State Awash in Extra Cash Ahead of Surtax Debate
The Department of Revenue collected more than twice as much money from taxpayers last month than it had anticipated and Massachusetts is now on pace to emerge from the pandemic-plagued fiscal year 2021 having collected more tax revenue than state officials projected before anyone here had heard of COVID-19.
DOR announced Thursday that it collected $4.002 billion in taxes from people and businesses in May — $2.264 billion or 130.3 percent more than was collected in May 2020 and $2.109 billion or 111.4 percent more than the Baker administration had estimated it would collect for the month. This year, the tax filing deadline was May 17 but last year it was in July. The May benchmark, which was not adjusted after the filing deadline was postponed this year, was $1.893 billion.
“May revenue included increases in most major categories, particularly personal income tax return payments,” Revenue Commissioner Geoffrey Snyder said. “However, historical comparisons to last year and previous years should be viewed with caution due to COVID-related timing changes to the 2020 and 2021 tax filing season as well as responsive measures undertaken to mitigate the impacts of COVID-19.”
With one month of fiscal 2021 remaining, state government has collected $30.451 billion in tax revenue — $1.360 billion more than DOR’s most recent estimate for the full 12-month fiscal year. Year-to-date collections are up $5.689 billion or 23 percent over the same 11-month period in fiscal 2020 and $3.938 billion or 14.9 percent over DOR’s expectations.
If June revenues now come in at exactly the DOR benchmark of $2.578 billion, Massachusetts will have collected $33.029 billion in tax revenue for fiscal year 2021.
That would be $3.939 billion or 13.54 percent more than what the Baker administration projected it would collect this fiscal year when it last updated its expectations in January, $3.42 billion or 11.55 percent more than what was collected during fiscal year 2020, and about $1.879 billion or 6 percent more than the pre-pandemic estimate of $31.15 billion in tax revenue for fiscal year 2021.
It would also be about $2.909 billion more than the consensus revenue agreement of $30.12 billion the governor, House and Senate used craft their fiscal year 2022 budget proposals. As the budget bills passed by the House and Senate head into conference committee negotiations in the coming week, the six-member panel could decide to wield considerable power by upping the revenue assumption to give themselves additional money to dole out. Democratic leaders in both branches have said they could consider increasing the projection, in part to reduce their planned raid of the state’s rainy day fund.
The over-benchmark fiscal 2021 collections, if they hold up for another month, would lead to a significant surplus this summer, which could come into sharper focus just as the governor and Legislature are making decisions about how to spend $5.3 billion in federal aid received as part of the American Rescue Plan Act.
Thursday’s announcement of May tax collections also came just hours after House Speaker Ronald Mariano and Senate President Karen Spilka announced their plan to take up a constitutional amendment to impose a surtax on household income over $1 million during a Constitutional Convention next week. If the proposal passed the joint session, it would go to the voters on the 2022 statewide ballot.
“We stand with the residents of Massachusetts in exploring new ways to increase revenue for the state as we envision and invest in an equitable and hopeful future for the Commonwealth,” Mariano and Spilka said in a statement Thursday.
Even before May’s benchmark-shattering collections were announced Thursday, Massachusetts had been in the midst of a trend of monthly tax collections obliterating DOR’s expectations. January collections beat the benchmark by 14.7 percent, February collections surpassed the benchmark by 24.8 percent, March revenues came in 26.8 percent over expectations and April collections beat DOR’s monthly benchmark by just more than 11 percent.
By May 15, DOR already had an indication that May tax collections were coming in strong. By mid-month, DOR had already collected $1.190 billion — an increase of $519 million or 77.5 percent over what had been collected during the same half-month period last year and about 63 percent of the $1.893 billion that DOR expected May to bring.
Putting the $2.1 billion over-benchmark number for May in context, Doug Howgate of the Massachusetts Taxpayers Foundation said tax collections in Massachusetts have never exceeded benchmarks by $2 billion or more for any full fiscal year going back to at least fiscal 2006.