April Tax Haul Could Build Savings Account for Mass.
By Matt Murphy
State House News Service
BOSTON -- After April tax collections left the state with nearly $1 billion more than expected, it’s a good bet that the bulk of surplus revenues left unspent at the end of this fiscal year will be socked away in the state stabilization fund, Gov. Charlie Baker and Senate President Karen Spilka said.
The unanticipated windfall after April, a month when tax collections soared almost 31 percent higher than in April 2018, left state budget writers in a comfortable position with just two month remaining in fiscal 2019.
While it’s unlikely to significantly impact the development of the fiscal 2020 budget, the potential for a surplus at the end of the fiscal year on June 30 could leave legislators and the Baker administration with decisions about how to spend or save that money.
Baker, when asked about the April tax haul on Monday, stressed that timing and changes in the federal tax law had a lot to do with the surge, and said the unexpected collections were mostly from volatile revenue streams.
He noted that income withholding taxes and sales taxes, “which I think is the best number to get a sense for what steady-state looks like,” account for about 70 percent of the state’s revenues and are only about 1 percent ahead of budget projections.
“We all, I think, agree that this will mean more significant deposits to the stabilization fund, which I think we all think is a good thing,” Baker said, gesturing to House Speaker Robert DeLeo and Senate President Karen Spilka after the three leaders had met Monday.
Neither DeLeo nor Spika spoke up after Baker alluded to agreement among the trio about what to do with excess revenues, but Spilka was asked directly after the leaders broke apart.
“It’s always a pleasure to have the revenue go up rather than down at the end of the year,” she said, recalling past years when revenues have plummeted in April and forced difficult spending decisions.
“A lot of it is one-time and lot of it is capital gains so we’ll be taking a look at that,” Spilka said.
Capital gains tax collections in excess of $1 billion are earmarked by statute for the “rainy day” fund.
Through April, revenue collections of $24.5 billion are running $961 million ahead of monthly benchmarks for the year, with non-withheld income taxes, corporate taxes and estate tax payments driving the excess collections.
The Massachusetts Taxpayers Foundation and Baker both noted that some portion of the revenue gains in April came from corporate dividend repatriation from overseas, which was a component of President Donald Trump’s federal tax reform and is “one-time in nature.”
The tax foundation said budget writers were “likely too conservative” with estimates of $65 million from this source.
Taxpayers Foundation President Eileen McAnneny said legislators should not spend the possible surplus on operating budget expenses, but rather save it toward the next “milestone” of $3 billion in reserves, or use it to pay down debt and pension liabilities and invest in one-time priorities like fixing the state’s transportation system or preparing for climate change.