Commonwealth Is Now $1.5 Billion Ahead of End-Of-Fiscal Year Target
As Gov. Charlie Baker embarks on a push for tax relief proposals, the Department of Revenue reported Thursday that it collected $4.026 billion in state tax revenue from people and businesses last month, a haul that surpassed expectations by $856 million or 27 percent and has helped to put the state nearly $1.5 billion ahead of its end-of-fiscal-year target.
As it did last month when it reported December revenues, DOR said Thursday that much of January’s windfall is likely temporary because many of the gains are attributed to a change in state law that allows certain businesses to avoid federal limits on state and local tax deductions. Still, even after adjusting for the business tax changes, the tax-collecting department said January receipts exceeded January 2021 collections by $315 million or 9.4 percent and topped the monthly benchmark by $791 million.
“January 2022 revenue collections increased in most major tax types, in comparison to January 2021 collections, including withholding, non-withholding, sales and use tax, and corporate and business tax,” Revenue Commissioner Geoffrey Snyder said. “The increase in withholding is likely related to improvements in labor market conditions. The non-withholding income tax increase is primarily due to the recently enacted [pass-through entity] excise; as mentioned above, most of this increase is temporary. The sales and use tax increase in part reflects continued strength in retail sales and meals taxes, which in turn were impacted by rising inflation.”
In the first seven months of fiscal year 2022, DOR has so far collected approximately $21.872 billion — $4.219 billion or about 24 percent more than actual collections during the same period of fiscal 2021 and $1.45 billion or about 7 percent more than the department’s year-to-date benchmark.
After accounting for the pass-through entity excise payments, DOR said that year-to-date collections are $2.982 billion or about 17 percent more than collections in the same period of fiscal 2021 and $794 billion or 4 percent more than the year-to-date benchmark.
“We ended last year with a surplus and tax collections continue to exceed projections in a big way. It’s time to enact tax breaks for families, seniors and more,” Baker tweeted Thursday just after DOR reported on January revenues. In his fiscal 2023 budget plan, the governor proposed tax breaks for renters, seniors, parents and low-income workers, a cut to the tax rate on short-term capital gains, and two changes to the estate tax.
Snyder said DOR will “closely monitor how the recent surge in COVID-19 cases and the revised restrictions on economic activities” could impact state revenue collections for the remaining five months of the fiscal year.
The Baker administration in January raised its estimate of fiscal 2022 tax collections by about $1.5 billion, and January’s tax haul puts the $1.5 billion above that newly revised fiscal year-end target.
