State officials: August tax collections fall $42M under benchmark
BOSTON — Weak tax collections in August left the Baker administration in a familiar position - managing a state budget in which revenues are not keeping pace with expectations.
The Department of Revenue announced Tuesday that August tax collections missed their monthly benchmark by $42 million,
Two months into the new state budget year tax revenues are now lagging behind projections by $36 million as Gov. Charlie Baker's administration considers whether to update its revenue forecast next month, which could be a precursor to mid-year budget cuts.
Revenue collections of $1.7 billion in August fell $42 million shy of monthly estimates used to build the state's $38.9 billion budget for fiscal 2017, according to the Department of Revenue. That total represents a modest 1.3 percent increase over the first two months of the last fiscal year, but trails benchmarks by 1 percent.
"Collections in August reflect a continuation of adverse trends from recent months, including relatively lower-than-expected growth in sales and income-related payments. While most economic data and independent researchers remain generally positive about the Massachusetts economy, we will continue to closely monitor our revenue collections," Revenue Commissioner Michael Heffernan said in a statement with the August revenue release.
Income, withholding and sales taxes were all below monthly benchmarks in August, while corporate and business tax collections of $38 million beat estimates by $3 million, but were down 23 percent from last August.
The $521 million in sales and use taxes reported with the August numbers represented a 2.3 percent increase over last year, but are not reflective of the fact that legislators this year opted against holding a sales-tax holiday weekend for consumers as they did last year out of concern for the margin of error in the budget.
Sales taxes typically lag by one month, according to a DOR official, meaning the August numbers are indicative of sales that occurred in July.
By Oct. 15, Administration and Finance Secretary Kristen Lepore will have to submit revised tax revenue estimates for fiscal 2017 in accordance with state law, unless she believes there have been no significant changes since the last estimate.
On July 8, Baker issued $264 million in line item vetoes and signed a $38.92 billion fiscal 2017 budget that he said solved for the declining revenue projections, but the Legislature restored $231.6 million in spending through veto overrides votes, leaving what the Massachusetts Taxpayers Foundation pegged as an early $240 million gap in the budget.
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