Tax collections exceeded the Baker administration's expectations by $372 million in February and surpassed the total of collections in February 2020, a development that positions the state to end this budget year having collected more tax revenue than it did last year.
The Department of Revenue (DOR) said it collected $1.874 billion in taxes last month. That's $359 million — or 23.7% — more than what was collected in February 2020. It is also $372 million — or 24.8% — more than what the DOR had been expecting.
Now eight months through fiscal year 2021, the Massachusetts state government has collected $19.527 billion in taxes from people and businesses, which is $1.123 billion or 6.1% more than it did during the same eight pre-pandemic months of fiscal year 2020. The last month Massachusetts saw a year-over-year decline in tax collections was September.
February is the least significant month for state tax revenue, typically generating less than 6% of annual receipts, DOR said. But it is also "the month in which refunds begin to accumulate as the tax filing season begins," the agency said. Revenue Commissioner Geoffrey Snyder cautioned Wednesday that refunds will soon become a greater factor.
"February's revenue figures were significantly impacted by a timing-related decline in income tax refunds as the electronic system for taxpayers filing 2020 income tax returns opened on February 12, 2021, which is about two weeks later than last year's start date of January 27th, 2020," Snyder said. "These figures should be viewed with caution and as the filing season progresses, we expect income tax refunds to catch up with last year."
All income tax collections for February came in $231 million above benchmark, sales and use taxes were $77 million over benchmark, corporate and business taxes ended up $12 million above benchmark and the "all other" category finished the month $52 million ahead of expectations, according to DOR.
Though Massachusetts now has a cushion of more than $1.1 billion between this year's tax collections and those from fiscal year 2020, DOR expects that figure to shrink dramatically over the coming months — but February's collections put the state in position to end fiscal 2021 having collected more than it did in fiscal 2020.
In March, the agency is projecting tax collections to be $2.413 billion, a decrease of $246 million from March 2020. In April, DOR expects to collect $3.48 billion, about $1.5 billion more than in April 2020, when the tax filing deadline was extended. May 2021 is expected to bring in $1.893 billion or $155 million more than May 2020.
If collections come in at exactly the DOR benchmarks from March through May, the state would enter June having collected about $2.531 billion more than it had collected to that point of fiscal year 2020.
DOR expects to collect about $2.249 billion less this June than it did last June, meaning the month (and therefore the fiscal year) would end with DOR having taken in about $282 million more than it did through all of fiscal year 2020.