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At the annual “consensus” revenue hearing on Dec. 5 at the State House, state budget officials heard cautious tax collection forecasts from economists and other fiscal experts concerned about the impact of a slowing economy on state revenues.
Department of Revenue Commissioner Christopher Harding reported that his department’s revenue forecast for fiscal 2020 assumes slowing economic growth that is expected to reduce growth in some areas of the personal income tax, including the traditionally volatile capital gains tax.
Following strong collections in fiscal 2018, which grew by 8.5 percent, Harding said more modest increases are expected for the current fiscal year (2.2 percent) and in fiscal 2020, when collections are projected to grow by 3.2 percent to $29.3 billion.
In addition to global and local economic trends and uncertainties, the Department of Revenue forecast reflects several state tax changes, including the expectation that an automatic income tax rate cut will be triggered effective Jan. 1, reducing the rate from 5.1 percent to 5.05 percent, and again on Jan. 1, 2020, cutting the rate to 5 percent. Together, these decreases will reduce state tax collections in fiscal 2020 by $263 million.
Harding’s forecast also reflects new revenue from state taxes on marijuana sales, with a preliminary estimate of $132 million.
The Massachusetts Taxpayers Foundation, in a news release titled “Are the Good Times Already Over?,” also offered a cautious forecast of tax revenues based on slowing economic growth. The foundation also warned that the state should be concerned about the “pre-recession warning signs” that may be signaling that the “second longest U.S. economic expansion on record may be coming to an end.”
The consensus revenue hearing is convened annually by the chairs of the House and Senate budget committees and the governor’s chief budget officer to help develop a common tax forecast to be used by the governor and the Legislature during the state budget process.
The governor is scheduled to file his fiscal 2020 budget recommendation by Jan. 23, 2019.
• Download Massachusetts Department of Revenue Briefing Book: FY2020 Consensus Revenue Estimate Hearing (326K PDF)
• Download Massachusetts Taxpayers Foundation report, “Are the Good Times Already Over?” (432K PDF)
• Download Remarks of Treasurer Deborah Goldberg from the Consensus Revenue Hearing (1.5M PDF)