by: By Colin A. Young, State House News Service
Posted: Dec 11, 2020 / 06:25 PM EST
Updated: Dec 11, 2020 / 06:25 PM EST
Due to the coronavirus the department of treasury is issuing to US citizens economic impact payments known as a stimulus check or tax refund concept.
BOSTON (SHNS) – The Baker administration now plans to collect nearly half a billion dollars more from taxpayers this fiscal year than it did two months ago when the governor filed his revised budget, money that could limit a big drawdown on the state’s reserves and support additional spending.
In conjunction with signing a $45.9 billion fiscal year 2021 budget Friday, Gov. Charlie Baker’s budget office also upgraded its tax revenue assumption by $459 million to $28.44 billion, in part due to fiscal 2021 tax collections that are running $142 million or 1.3 percent ahead of fiscal 2020 collections through five months.
The Executive Office of Administration and Finance said it expects to receive $249 million more in income taxes and $210 million more in sales taxes than it estimated in mid-October when Baker filed a revised budget that assumed $27.592 billion in available tax revenue this fiscal year. The administration made no change to its assumptions for business and other taxes.
Baker’s budget office expects to be able to do a couple of things now that it expects to collect more from taxpayers. The administration is budgeting for a $1.35 billion withdrawal from the state’s rainy day fund even though the budget authorizes a draw of up to $1.7 billion, which one administration official said would be made possible by the upgraded revenue figure and the governor’s vetoes of some earmarked spending.
The revenue estimate upgrade also gave the administration flexibility to file a $107.4 million supplemental budget Friday that would fund the portion of Baker’s proposed small business recovery program that the Legislature trimmed from the budget ($49.4 million), allow the administration to distribute about $53 million in K-12 education funding without being constrained by a formula, and provide $5 million to help establish a new Peace Officer Standards and Training Commission.
When Baker filed his initial fiscal 2021 budget before the pandemic, it was built on the $31.15 billion revenue estimate his office and key lawmakers jointly agreed to. As the pandemic ravaged the economy and budget writers opted to put the budget off until several months into the fiscal year, some economists and lawmakers expected fiscal 2021 tax revenue could be as much as $8 billion shy of that pre-pandemic estimate.
Instead, Baker’s latest revenue projection would represent a decline of $2.71 billion, or 8.7 percent, from the pre-pandemic consensus revenue estimate. It also represents a decline of $1.156 billion or 3.9 percent from actual fiscal year 2020 collections of $29.596 billion.
Through November, the Department of Revenue had collected $11.464 billion in tax receipts for fiscal 2021 — $142 million or 1.3 percent more than had been collected during the same time period in fiscal year 2020.
“Month after month, state tax revenues seem to defy economic logic,” Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, said last week when November revenues were announced. “They’ve held up surprisingly well since the summer, despite high unemployment and real hardship. A lot could still go wrong, but the state is actually on pace to collect over $31 billion in FY21, significantly more than the $27.6 billion estimate built into the proposed budget.”
Baker’s budget office, though, does not expect it will collect more than $31 billion, meaning the bottom is bound to drop out at some point and the trend of rosier-than-expected monthly tax hauls will end.
An Administration and Finance official said Friday that the latest nationwide surge in COVID-19 cases presents significant uncertainty for the economy generally and specifically tax receipts and that the federal tax law changes of recent years have put added importance on the months of March, April, and May for state tax collections.