A top Senate budget writer warned tax collections in Massachusetts for July were expected to be “very bad,” a sign that the state’s economic woes of the past fiscal year are likely to continue into the new one.
Sen. Michael Rodrigues, a Westport Democrat who helps draft the yearly state budget, said even though July, the first month of fiscal year 2025, is a small tax collection month compared to the rest of the year, officials were in store for “some very bad news.”
“We know that we’re going to have some very bad news on the economic front in just the next few days, that July’s numbers are going to be very bad,” he said Thursday morning after a marathon end to formal lawmaking for the year. “And July is a small month, by the way, so it’s concerning to all of us.”
Massachusetts witnessed rollercoaster revenue collections in fiscal year 2024 that led Gov. Maura Healey to reduce tax forecasts by $1 billion, unilaterally slash $375 million from the budget, and eventually put in place a pause on most state hiring through at least October.
The situation appears to show no sign of letting up and it is already having impacts on budgeting this fiscal year.
In a letter to lawmakers, Healey said she was vetoing roughly $317 million from the $57 billion fiscal year 2025 budget that legislators sent her earlier this summer because of “some uncertainty in the economy as we start FY25.”
A spokesperson for Healey’s budget writing office referred to Healey’s letter and a mid-month revenue report for July when asked to respond to Rodrigues’ comments
“The July revenue report will be published Monday, Aug. 5, as is the standard practice,” the spokesperson, Matt Murphy, said.
Rodrigues said he was not considering any cost cutting measures or changing the fiscal forecast for fiscal year 2025.
“I think we are going to let the governor’s veto sustain, and just monitor the situation going forward. I don’t think there’s any reason to do more than that at this point in time,” he said.
The mid-month revenue report for July from the Department of Revenue showed collections through the first several weeks were down 8% compared to the same period in July 2023.
There were decreases in withholding, non-withheld income tax, and “all other” tax which were partially offset by gains in corporate and business tax and sales tax, according to the report.
But revenue officials caution against taking too many cues from the mid-month report because collections are uneven and typically weighted toward the end of a month.
“The brief period covered in the mid-month report does not provide sufficient data for meaningful comparison to prior years. Therefore, mid-month figures should not be used to assess trends or project future revenues,” the Department of Revenue said in the report.
Massachusetts Taxpayers Foundation President Doug Howgate said what is more troubling than potentially dismal tax returns in July is Massachusetts’ inability to experience a turnaround after months of plateaued collections.
“They’ve been buoyed by surtax, they’ve been buoyed by capital gains, but … sales tax has gotten sluggish, and corporate has not rebounded yet. And so I think that the concern in July, for me, wouldn’t necessarily mean that this is signaling some new world we’ve necessarily entered into, it’s just another month where we don’t see kind of that turnaround,” he told the Herald.