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Soaring unemployment and the expectation among public health experts that a second wave of the coronavirus could hit this fall has prompted a leading Beacon Hill watchdog group to revise its tax revenue forecast for next year, now predicting the state could collect $6 billion less than anticipated just five months ago.
The Massachusetts Taxpayers Foundation released its updated economic outlook on Monday, the same day Gov. Charlie Baker detailed his administration's plans to slowly allow the economy to begin to reopen from the COVID-19 shutdown.
The nonpartisan, business-backed think tank said even if consumers go on a spending "spurt" as retail and restaurants reopen later this summer, it's likely that discretionary spending will be limited by people's "confidence in their financial well-being — a task that could take years depending on the length and severity of the pandemic."
MTF President Eileen McAnneny testified before lawmakers and the administration in April about the changing dynamics of the state's budget picture, predicting a drop off of $4.4 billion in estimated tax revenue collection in fiscal 2021 due to the pandemic.
McAnneny now says that prediction was "overly optimistic," and that revenues could miss targets set in January by more than 19% as unemployment in the state swells to 22% by June. That level of job loss, her group said, would cause withholding taxes to fall by $1.9 billion and cost the state $2 billion in sales taxes.
"More current data indicate that the economy is unlikely to ramp up quickly and the job loss will be far greater than originally expected. As the size, scope, and duration of this public health crisis grow, we have revised our forecast to reflect the deteriorating economic outlook. With rapidly-changing economic and fiscal conditions this may not be the last time a revised forecast becomes necessary," McAnneny said.
- Mass. Taxpayers Foundation Updated FY 2021 Tax Revenue Forecast
- 36.5 Million Have Filed For Unemployment In 8 Weeks
- The Coronavirus In Mass.
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