#2021-18 June 25, 2021

Annual Tax Collections Beating Estimate By $3.4 B and Counting

Through mid-June, the Department of Revenue (DOR) collected nearly 80 percent of the tax revenue it anticipates bringing in during this final month of a remarkable fiscal year.  A year that has already exceeded all expectations and appears likely to produce a significant surplus.

In its mid-month report to the Legislature, DOR said it had collected $2.003 billion from taxpayers between June 1 and June 15, up $768 million or 62.2 percent compared to the same period in June 2020.  DOR’s latest monthly benchmark for June projected a monthly total of $2.578 billion.  With the second half of June remaining to be counted, DOR has collected $32.454 billion so far in fiscal year 2021, which ends June 30.  That’s $3.364 billion more than the Baker Administration’s most recent estimate for the full 12-month fiscal year and $1.3 billion more than the pre-pandemic estimate of $31.15 billion in tax revenue for fiscal year 2021.

It is also $2.334 billion more than the consensus revenue agreement of $30.12 billion the Governor, House and Senate used to craft their fiscal year 2022 budget proposals.  The six lawmakers currently negotiating a compromise fiscal year 2022 budget could wield considerable power by increasing the revenue assumption to give themselves additional money to spend, save or turn back in the form of tax relief.

The fiscal year 2021 tax collections, which have far-exceeded the Baker Administration’s expectations for the last several months, look to be headed towards a significant surplus – yet another welcomed surprise pot of funds for the Governor and Legislature to manage while also deciding how to spend more than $5 billion in federal aid received as part of the American Rescue Plan Act. 

Governor Baker Seeks Two-Month Sales Tax Holiday

As reported above, with Massachusetts on track to end the year with a multi-billion-dollar surplus, earlier this week Governor Charlie Baker proposed a two-month sales tax holiday that would give consumers a break from the state’s 6.25 percent sales tax in August and September in an effort to drive shoppers to local businesses.  As it stands now, the tax-free holiday has been set for the weekend of August 14 and August 15.

The major tax relief proposal would cost the state an estimated $900 million in forgone revenue, but Governor Baker hopes it would also be a way for the state to show appreciation to business owners and consumers who have contributed to the surplus by finding ways to support each other during the COVID-19 pandemic. 

It remains unclear as to whether the House and Senate would go along with the Governor’s proposal, with members from both chambers floating alternative ways – from fixing the MBTA to relieving student debt - of handling the expected windfall of revenue in recent days.