BOSTON, Mass. (SHNS)–After a steady stream of way-above-projected collections created an “unprecedented” surplus, the Baker administration on Wednesday upgraded its official estimate of how much money Massachusetts will bring in from taxpayers this year for the third time.
The administration announced it now expects to tally $37.666 billion in tax collections over the course of fiscal year 2022, about $1.7 billion or 4.78 percent more than the most recent estimate in place and more than $7.5 billion or 25 percent beyond what the executive branch and legislative leaders anticipated when they first agreed to a projection in January 2021.
Through the first 10 months of FY22, state government had hauled in $4.24 billion more than its most recent projection, positioning Massachusetts to end another spending cycle with a multibillion-dollar surplus. “Even after upgrading projections by $1.5 billion in January, tax collections through April were $4.241 billion, or 14 percent more than the year-to-date benchmarks,” Administration and Finance Secretary Michael Heffernan said Wednesday. “The commonwealth is on a path to two successive years of double-digit increases in tax collections, which is unprecedented in recent times.”
In January 2021 — less than a year into the COVID-19 pandemic, at a time when the state’s economy was still feeling significant strain — Heffernan, House Ways and Means Chairman Aaron Michlewitz and Senate Ways and Means Committee Chairman Michael Rodrigues said they expected Massachusetts to collect $30.12 billion in tax revenue in FY22.
Officials agreed in the state budget signed in July 2021 to push the “consensus revenue estimate” for FY22 up by $4.23 billion to $34.35 billion, then upgraded the projection again in January by another $1.598 billion to $35.948 billion. That figure remained in place until Wednesday’s change, which pushed the latest projection for FY22 tax collections higher than the FY23 consensus revenue estimate of $36.915 billion announced in January. That figure is being used as the foundation of the House and Senate budgets for next fiscal year.
Taxpayers already produced a surplus of roughly $5 billion last year, and Beacon Hill bundled much of that money together with American Rescue Plan Act dollars that went toward unemployment insurance relief for businesses, premium pay for front-line workers, and a slew of other investments across the state. State government also bulked up its “rainy day” savings account, and the fund could surpass $6 billion — roughly 12 percent of the House’s $49.7 billion fiscal 2023 budget — this year.
Another surplus now looms on the horizon and will be finalized only a few months before voters head to the polls with not only the governor’s office and all 200 House and Senate seats on the ballot, but also a likely ballot question seeking to increase household income taxes on the state’s wealthiest residents. The influx of cash has prompted debate on Beacon Hill over whether to boost spending, cut taxes or sock away money into reserves, all while the Legislature sits on more than $2 billion in unspent federal ARPA money.
Gov. Charlie Baker has been pressing lawmakers to lean toward the first two of those options, arguing unsuccessfully for months in favor of a $700 million tax relief package and on Wednesday rolling out a new $1.7 billion spending bill funded by this year’s surplus.
Baker on Wednesday pushed for quick action to put the dollars to work before the economic outlook tilts downward. “We’re making these investments now because we are deeply concerned about what is going to happen over the course of the next several years with (the) supply chain and especially with the cost of pretty much everything,” Baker said. “Month over month, we keep seeing our tax revenues soar wildly past any projections anybody had at the start of the year.”