State tax receipts sets new record high
The Department of Revenue collected nearly $2 billion from Massachusetts taxpayers in September, setting a new record and prompting Gov. Mitt Romney to re-issue his call for tax relief.
"It's pretty clear, Massachusetts is back and firing on all cylinders,"
Romney told reporters he called inside his office after learning about the
revenue numbers.
Receipts for the month of $1.94 billion exceeded last September's
collections by 14.3 percent, or $242 million, and provided proof that sales
and use taxes grew despite a two-day sales and use tax holiday in August
designed to boost consumer buying and the economy.
The September numbers are good news overall for state budget writers and
legislators, who are trying to restore services slashed during the recent
recession, build rainy day reserves, and create an environment where tax
cuts are more likely to receive bipartisan support.
Romney said the numbers show it's time to deliver on an income tax rollback
approved by voters in 2000. Voters statewide approved a ballot law calling
for the rate to be rolled back to 5 percent. The rate was dropped to 5.6
percent, and then to 5.3 percent before the Legislature froze the rollback
in 2002 when state tax collections plummeted in concert with a
recession. The tax rate now stands at 5.3 percent.
Romney says the rollback would cost the state $220 million this year, and
close to $600 million in following years.
"We can't keep walking around the building with long faces like things are
terrible," Romney said. "They're not. The economy is back."
But legislative leaders and some interest group leaders said a tax cut is
premature.
Citing rising energy costs and the potential loss of a Medicaid funds that
would cost the state between $450 million and $600 million, Sen. President
Robert Travaglini (D-East Boston) said the state is unprepared to issue a
tax cut.
"We face a period of uncertainty financially and that I think it would be
prudent on our part to wait to entertain what the governor suggests is in
order presently," he said. "Before those variables take on a value, I'm not
willing to make any determination on a tax rollback and it would be unwise
to do so."
House budget writers also resisted the governor's latest call for tax relief.
"We need to look at September's revenue collection numbers for what they
are - an encouraging sign, but certainly not cause to dramatically alter
course," House Ways and Means Chairman Rep. Robert DeLeo (D-Winthrop) said
in a statement. "Given a temperamental economy, rising energy costs, and
the fact we utilized $600 million from our Rainy Day fund to balance this
year's budget, it would be irresponsible to use today's developments as a
political device to undue the fiscal prudence we have worked so hard to
achieve."
The September collections marked the second largest monthly take ever,
surpassed only by the $2 billion collected this past April. For the first
three months of this fiscal year, state tax collections are up 7.9 percent,
and are beating budget benchmarks by $194 million.
Romney also announced that the state has collected $1.215 billion above
what lawmakers budgeted in fiscal 2005. Meanwhile, the state's
stabilization fund is nearing its highest level ever, just $5 million shy
of its peak in 2002.
According to Romney, the stabilization fund balance now stands at $1.710
billion.
Sales and use tax receipts were up 3.4 percent, despite the two-day sales
tax holiday in August that was reflected in the September numbers. Income
tax collections were up 12.9 percent for the month, withholding receipts
rose 8.2 percent and corporate and business tax receipts shot up 35 percent.
"No matter how you slice it this was a very good first quarter," Revenue
Commissioner Alan LeBovidge said.
Some in the business community say a strong first quarter doesn't mean the
state can afford to cut the income tax.
"We're only three months into the fiscal year," said Michael Widmer,
president of the business-backed Massachusetts Taxpayers Foundation.
"Regardless of the '05 surplus and '06 numbers, any income tax cut is a
permanent change."
Widmer suggested that the state should first help residents in cities and
towns where property taxes are soaring.
In a corporate tax bill approved in July, the Senate unanimously passed a
plan to begin reducing the income tax once revenues return to fiscal 2002
levels. The House did not include the plan in its version of the
legislation, which is now being negotiated by the two branches.
House Speaker Salvatore DiMasi said lawmakers trying to determine what to
do with the surplus revenue.
"It's good news, it's good news for all of us," he said. "I like it. A lot
of the things that we're doing are helping out. We have a lot more to do. I
think people have confidence in that we're balancing our budget and putting
our revenues where we think can be beneficial. We have an economic stimulus
package coming up that people feel very good about. That takes an
investment. We have a health care plan that might costs us some money. The
energy package we just passed, too, is going to cost $80 million. These are
all good causes. These are all good things to help the Commonwealth and our
citizens and I think the cities and towns as our partners in government are
also going to have something to say about it, as well. So what we're going
to do is, we're going to sit down and try to analyze all this and figure
out what's the best thing do."
DiMasi didn't respond to questions about whether an income tax cut should
be included in the proposals being discussed.
To date, lawmakers have spent $178 million of the fiscal '05 surplus in
supplemental appropriations to shore up accounts and fund union contracts.
They have also transferred $827 million to the Rainy Day fund, and have an
additional $270 million in a separate account to be spent later, Romney said.
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