April Tax Receipts Surge By More Than $1 Billion

Massachusetts taxpayers showered state government with a nearly $1 billion windfall in April, altering state budget dynamics and making it possible for Beacon Hill to at least think about the possibility of a year-end surplus.

The $4.32 billion collected in April represented a $1.02 billion, or nearly 31 percent increase over April 2018 tax receipts and put state government on course to potentially far outpace the collection number that Gov. Charlie Baker and the Legislature used to build this year's $41.7 billion state budget.

With two months left in fiscal 2019, tax collections of $24.5 billion are up 8 percent, or $1.8 billion over the same ten-month period in fiscal 2018 and are running $961 million, or 4.1 percent ahead of the benchmarks that state budget writers have been using to make fiscal ends meet.

The news comes as Beacon Hill Democrats cast about for new tax and revenue sources to fuel their spending desires, especially in the areas of education and transportation. State officials are embarking on a multi-year plan to ramp up K-12 education spending, an effort Baker says does not require new taxes, and Democrats are restarting their push for a 4 percent income surtax on households with annual incomes above $1 million.

The revenues for April, the biggest month of the year for collections, were announced early Friday evening, hours after the federal government announced that U.S. employers added 263,000 new jobs in April, beating the average monthly gain of 213,000 over the past 12 months.

Analyzing the collections, state revenue officials said individual income tax withholding and sales taxes, which account for about 70 percent of annual tax revenues, poured in at levels close to monthly benchmarks, with almost all of the big gains coming in three "historically volatile categories."

Revenue from non-withheld income, which officials say reflects taxes due for 2018 but received in fiscal 2019, are running $336 million above benchmark. Corporate taxes are eclipsing benchmarks by $473 million, which the revenue department attributes in part to federal tax changes and repatriation. Estate tax payments are running 38 percent above benchmarks, or $142 million year to date.

"The strong results in April offset the shortfall in estimated payments that we experienced in December and January, because we believe many taxpayers opted to make their payments with returns and extensions during the April filing season," Revenue Commissioner Christopher Harding said in a statement, cautioning that the patterns "cannot be relied upon to repeat" and observing that categories of revenues that rose sharply can also fall.

Only three months ago, as collections fell well shy of December and January benchmarks, receipts were running 2.4 percent lower than projections and were up only 1.3 percent over actual collections for the first seven months of fiscal 2018. Collections in January fell 6 percent compared to January 2018.

While a small percentage of overall collections, receipts associated with motor vehicle sales in April were up nearly 30 percent over April 2018.