Experts See State Revenues Holding At Elevated Levels

Experts See State Revenues Holding At Elevated Levels

(Source: State House News Service)

[Coverage Developing] The state tax revenue gravy train might not be coming to a hard stop, but it looks like it will be slowing down from its frenzied pace over the next year and a half.

That was the message that House Ways and Means Chairman Aaron Michlewitz, Senate Ways and Means Chairman Michael Rodrigues and new Administration and Finance Secretary Matthew Gorzkowicz heard during the early going of the annual consensus revenue hearing, held to help state budget writers estimate the revenues that will serve as the foundation of forthcoming fiscal year 2024 budget plans.

"I know I speak for my colleagues when I say that we are excited to get to work with the new Healey-Driscoll administration and Secretary Gorzkowicz. After managing record-breaking surpluses alongside my counterpart, Senator Rodrigues over the past four years, we'll all know who to blame if it doesn't continue going forward," Michlewitz joked at the start of the hearing. "Predicting future revenue figures can be a difficult process in normal times. Given the volatile economy we find ourselves in, this year will be especially challenging."

But none of the first few speakers who testified Tuesday said that their forecasts call for fiscal year 2024 revenues to top the $41.105 billion collected in fiscal year 2022 and set another record for the state's coffers.

Revenue Commissioner Geoffrey Snyder said that the Department of Revenue forecasts that fiscal year 2024 state tax revenue will fall within a range of $39.838 billion to $41.017 billion. That would represent between 0.2 percent and 1.3 percent growth from the agency's fiscal 2023 forecast, Snyder said. If revenue from the state's new income surtax were to be included, Snyder said DOR's fiscal 2024 forecast would be for between 3.2 percent and 5 percent growth based on its fiscal 2023 forecast.

Doug Howgate, the president of the Massachusetts Taxpayers Foundation, said he projects that fiscal year 2024 state revenues will come in at $40.06 billion, an increase of $366 million or about 1 percent over fiscal 2023.

"There are numerous cross-currents that affect the forecast, including healthy withholding and sales tax revenues offset by significant declines in non-withholding revenues due to reduced capital gains taxes and $1.5 billion in state paybacks due to pass-through entities," Howgate said in prepared remarks. "It should not surprise that this forecast comes with several caveats."

MTF's estimate does not include any revenue from the state's new surtax on household income above $1 million. Howgate added, "FY 2023 and FY 2024 present unique challenges for a reliable estimate given the unknowns surrounding surtax revenues."

MTF said it expects withholding income tax revenue, combined with sales tax revenue, will increase a combined $1.14 billion in fiscal 2024. But a projected $1.02 billion decline in other non-withholding income tax revenue will almost nearly offset that growth, the organization said.

Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, estimated that fiscal year 2024 state tax revenue will land at $40.2 billion, about 1.5 percent above the current year's benchmark.

That estimate, Horowitz said in prepared remarks, is based on a predictive model that shows a "nearly 1:1 correlation between national GDP and Massachusetts tax revenues" and U.S. GDP estimates from numerous sources.

"Gathering these together, we find a general consensus for a 'slow-cession' through the middle of 2024, where the growth rate of the economy flags but doesn't collapse," he said. - Colin A. Young/SHNS | 1/24/23 12:41 PM