The state’s tax takings fell billions short of revenue predictions for April, an announcement swiftly met with alarm by both conservative and progressive political groups.
April’s tax haul, originally forecast to come in at around $6.4 billion, was instead $1.6 billion less than expected by state budget writers and $2.2 billion lower than the historically high windfall of last April.
“The decrease in April revenues largely represents a previously understood exposure to the fiscal year 2023 budget from capital gains and the timing of taxpayers’ use of pass-through-entity credits that we are reviewing closely and will continue to monitor over the final two months of the fiscal year,” Secretary of Administration and Finance Matthew Gorzkowicz said in a statement with the release of the Department of Revenue’s April report.
When last year’s mid-spring revenue report arrived nearly $2 billion higher than was expected, lawmakers began to consider a tax cut proposal floated by then Gov. Charlie Baker. Just a few months later lawmakers learned all of that excess and then some would need to be returned to taxpayers and the idea of cutting taxes shelved as a consequence.
Both Gov. Maura Healey and the House have offered new tax cut proposals, a pair of plans with similar targets but different costs which conservative groups warn may now see the hook.
“There are some people on Beacon Hill that will try to use this data to tell Massachusetts taxpayers that they just don’t have the money for tax relief now, but it’s only through significant tax cuts and eliminations that will keep people here,” Paul Craney, a spokesman for the Massachusetts Fiscal Alliance, said in a written statement. “While they agonize over passing modest tax relief, the state is hemorrhaging taxpayers.”
Raise Up Massachusetts, the progressive group behind the state’s new millionaire’s tax, responded to the revenue news with equal concern but for entirely different reasons. A spokesperson for the group urged lawmakers to view the report as a sign they should not carry through with their plan to cut taxes.
“Senators should treat this report as a red light. Rather than cutting taxes for the wealthy, they should focus on making sustainable investments in affordability for working families,” they said. “If we give away hundreds of millions of dollars each year in new tax breaks for the ultra-rich and large corporations, we won’t be able to make the investments in housing, childcare, and transportation that are needed to make Massachusetts truly affordable, equitable, and competitive.”
Jim Rooney, the president of the Greater Boston Chamber of Commerce, offered a calmer voice, pointing to the state’s historically sound fiscal footing and the scale of the Commonwealth’s entire balance sheet.
“We need to consider these numbers within the broader, historical context: the state still has ample funds because of the tremendous growth during previous years,” he said in a statement. “The slowdown in revenues should be considered in the context of the budget’s size, which is $56 billion. With this context, it is clear that a slowdown in revenues doesn’t warrant the sounding of an alarm given the state’s plentiful funds and resources.”
Rooney’s cool headed message matched that of the Administration and Finance, which along with the April report offered the caveat that the cost of the governor’s tax cut proposal had nothing to do with this year’s revenue expectations.
“The Governor’s tax relief package is fully paid for in the House 1 budget proposal and was developed with a long-term perspective that was not dependent on the revenue forecast or results from a single year or a single month,” they wrote.
Through April, the state has taken about $32.3 billion from taxpayers, according to the DoR, which is about $703 million less than was originally forecast for this point in the fiscal year.
The majority of the revenue shortfall, according to DoR, was from lower than expected capital gains and more use of a credit available to some S-Corps, LLCs and Trusts.