One thing that the state lawmakers working to come up with a revenue figure for the next fiscal year can know for certain is that they are facing uncertainty, they were told Monday, and experts say they should plan accordingly.
Speaking during their Fiscal Year 2026 Consensus Revenue Hearing, fiscal watchdogs and academics told the state House and Senate members on the Joint Committee on Ways and Means that political and social upheavals, both globally and domestically, have them concerned over what the economic future holds.
That’s despite the fact that, at the moment, things look rather good in Massachusetts: the state has a record amount of money sitting in its rainy day fund, revenue is currently projected to be up this and next year, and the “millionaire’s tax” that was predicted to chase away the state’s wealthy is instead expected to bring in about twice as much as was estimated when it was passed into law.
After relatively flat growth through fiscal 2023 and 2024, the state can expect to “see moderate, positive revenue growth” for fiscal 2025 and 2026, Doug Howgate, president of the Mass. Taxpayers Foundation, told the committee.
However, according to the state commissioner of revenue, Geoffrey Snyder, there are open questions about any number of subjects which could lead to large swings in the tax revenue.
“Will the Fed continue to ease monetary policy and at what pace? What’s the duration? What’s the destination? And we have other significant global, domestic and political factors,” he said.
A lot of the variables, according to UMass Dartmouth professor of public policy Michael Goodman, have a single source in President-elect Donald Trump. With Trump comes uncertainty, Goodman said.
“None of us truly know what’s going to happen next, particularly given our experience between 2016 and 2020,” Goodman said. “Lot’s of things have been said, lot’s of things have been promised, and the real question for us is which things are going to get done.”
Snyder agreed that Trump’s policies may hit the state’s bottom line.
“Tax collections will vary depending on many factors, including one, the potential impact of the president-elect’s full suite of policy proposals and their impact on inflation, interest rates and the economy in general,” Snyder said.
Trump may, Goodman said, even without Congressional approval, throw a wrench in the state budget through “more severe” immigration policies like his oft-stated plan to begin mass deportation on his first day in office.
Many of the state’s industries rely on both legal and undocumented foreign-born labor, Goodman said. If those employees are forced to leave the country or are afraid to leave their homes in order to go to work for fear of being arrested and sent away, it will have an immediate effect on the state economy.
The state’s “innovation economy” would take a major hit if the talent from overseas that’s currently drawn to our biotechnology and advanced manufacturing sectors is kept out of the country through stricter immigration laws. The state’s largest sectors and biggest academic institutions would suffer severely, he said.
“Even tough talk discourages the foreign born — whether they have an immigration status or not that’s legal — from sending their kids to school, reporting to work, and reporting crime,” he said.
The government going about the process of mass deportations, Goodman said, will also likely have an impact on non-immigrant workers and employers.
“The kind of door-to-door raid stuff would be highly disruptive, as it would discourage people, even those who weren’t vulnerable, from reporting to work or participating in society and doing all of the things that we want people to do,” he said.
According to the The Massachusetts Taxpayers Foundation, the state will see about $40.9 billion in non-Millionaire’s Tax revenues in fiscal 2026, an increase of 3.1% driven by “gains in personal income taxes and corporate taxes drive growth, as sales tax revenue growth lags and other taxes recover from faltering estate tax collections.”
The Foundation estimates the Millionaire’s Tax will bring in $2.6 billion in fiscal 2026.
Lawmakers said they are aware of their blind spots.
“Predicting future revenue figures, as me and my counterpart have seen over the last couple years, can be a very, very difficult process in normal times,” House Ways and Means Chair Aaron Michlewitz said.
“But given how volatile our revenue has been over the last couple years, this will be especially challenging. It will be especially challenging because the commonwealth not only faces the challenges at home, but we face unprecedented factors on a federal and global stage,” he said.
Howgate told the budget writers the best thing they can do when facing uncertainty is limit budget growth.
“As we think about the long-term structural stability of the budget, the spending decisions made now have such a huge impact in the budget next year, in the year following, in times when we have a lot of uncertainty,” he said.
Herald wire services contributed.
