Massachusetts tax revenues surged in April to top predictions by more than $2 billion, an “unheard of” amount, according to Governor Charlie Baker, and one that ultimately may help usher a tax relief package through the Legislature.
With a record $6.9 billion in revenue last month, Massachusetts now has at least $3.6 billion more than what it expected to collect with two months left in the fiscal year. The overperforming receipts quickly added fuel to Baker’s months-long campaign prodding the Legislature’s Democratic leaders to give residents tax relief, and, in the Senate, some confidence the state could afford it.
Senate President Karen E. Spilka, citing the April revenues, said in a statement Wednesday that she’s asked colleagues to “pursue a tax relief package” before formal sessions end in July, offering the first public indication the chamber could debate such a bill in the coming months.
“It’s going to be billions of dollars of surplus revenue,” Baker said in an interview. “At some point, people deserve our help and we can give it to them, and still fund all the stuff that people want to fund.”
Amid record inflation, Baker has pushed a roughly $700 million package of tax breaks that seeks to help a range of residents, from renters and low-income workers to families passing on generational wealth, among others. But until now, legislative leaders had not committed to Baker’s proposal or any other tax relief measures.
The state collected nearly $2.1 billion last month, or 42 percent more than the state’s projection for April, which, with Tax Day, is historically one of the state’s best-performing months. Baker administration officials said that with the exception of May 2021 — when revenues exceeded estimates by more than $2.1 billion, thanks, in part, to officials pushing back the April tax filing date — the gap between projections and actual collections has never been higher in a single month in state history.
The state finished its last fiscal year with roughly $5 billion more than it expected, ultimately leaving Baker and the Legislature with a roughly $1.5 billion surplus. The extra money was later spent as part of a multibillion-dollar COVID relief bill.
Filed in January, Baker’s tax break measure would double the allowable tax credits for dependent children and child care, allow hundreds of thousands of low-income taxpayers to qualify for “no-tax status,” and double the maximum credit low-income seniors can claim to offset property taxes.
It would also double the threshold for the state’s estate tax from $1 million to $2 million, and slash the tax rate on short-term capital gains, or investments held for up to a year, from 12 percent to 5 percent.
But House leaders have yet to embrace the package, saying they are still reviewing proposals to reshape the state’s tax code amid warnings the flush fiscal times are unlikely to last.
S&P Global Ratings, a credit rating agency, said in a report issued last week that slower revenue growth is likely on the horizon, suggesting that states “depending on economic growth to offset tax rate reductions” could face budget pressures depending on how accurately they forecast their revenues.
The House last month passed a nearly $50 billion budget plan that didn’t feature any tax breaks and instead included more than $1.4 billion in spending above what Baker proposed. The approach underscored deeper questions of just how the state should use its flush revenues at a time of escalating inflation.
The Legislature’s revenue committee, which has been weighing Baker’s proposal, on Wednesday also filed an extension that would give it until July 31 — or when formal sessions are scheduled to end — to produce a recommendation on the bill, muddying the potential timeline for when, or if, a bill could emerge.
Representative Mark J. Cusack, the House chairman of the revenue committee, said that Baker’s bill is still “alive,” and that the committee is analyzing what could be most impactful “in the long term.”
“Obviously it’s helpful to the package,” the Braintree Democrat said of the overperforming revenue collections. “It’s also not going to be good news forever.”
Spilka, however, indicated for the first time Wednesday that she wants to pursue a package of some type. The Ashland Democrat said in a statement that she has asked senators “to work with their partners in government” after the Senate finishes its debate on its state budget plan later this month.
“While the details remain to be worked out, I believe we can safely balance targeted spending investments to a number of crucial areas, such as housing, childcare and higher education, with tax relief for individuals and families who are feeling the effects of inflation and continued economic disruption,” Spilka said in a statement.
Baker, who is not seeking reelection this fall, has continually pressed for movement. He also pointed to Connecticut, where the Democrat-led House on Tuesday passed a budget plan that includes more than $600 million in tax cuts and other relief. Governor Ned Lamont, a Democrat, billed the package as the “largest tax cut in state history.”
Not passing some type of relief here, Baker argued Wednesday, would be a “huge missed opportunity.”
“We could afford to fund our entire tax package more than once with just the surplus in April,” he said.
A Suffolk University/Boston Globe poll found residents have an appetite for tax relief. Asked whether they think their taxes should be raised, kept the same, or lowered, more than 52 percent of registered voters said they should be lowered using tax breaks or tax cuts. More than one-third — 36 percent — said they should stay the same, while 5 percent said they should be raised.
As a reporter asked House Speaker Ronald Mariano about the poll at a Monday news conference with Baker, the governor emphatically clapped in the background at the support for cutting taxes.
“That was a tough poll to get an answer from,” Mariano said sarcastically. “Do you want your taxes lowered? Hmm. No.”
But the Quincy Democrat was noncommittal about pursuing a package. He said House leaders are still considering proposals they have “investigated in the past” — an apparent reference to reshaping the state’s estate tax, which Mariano has spoken about as a possible option — and appeared to tie any potential decisions to the performance of the economy.
“I don’t know what’s going to happen,” he said. “If we continue to get news, then we’ll continue to look for alternatives.”
Mariano’s office declined further comment Wednesday.