Economic Journal Reports Mass. Economy “Shifted Into A Lower Gear”
FEB. 5, 2025…..January is a big month for tax collections so its receipts are closely watched as an indication of how the second half of the state budget year may play out. And this January’s collections came in strong — up 14% over January 2024 and beating official expectations for the month by 11% or more than $400 million.
The Department of Revenue reported Wednesday that it collected $4.1 billion last month, an increase of $505 million or 14.1% compared to actual collections last January and $406 million or 11% above the monthly benchmark. The healthy haul pads the state’s revenue cushion in the face of demands on state spending.
Fiscal year 2025 collections through December were $159 million or 0.8% ahead of benchmark and January’s take moved the state to now stand $566 million or 2.5% above the Healey administration’s expectation for this point in the budget year.
“January revenue included increases relative to January 2024 collections in withholding, and non-withheld income tax,” Revenue Commissioner Geoffrey Snyder said. “The increase in withholding is possibly due to bonus related activities and surtax revenue. The increase in non-withholding income tax is due, in part, to a likely increase in surtax revenue, capital gains tax revenue, and the pass-through entity excise.”
DOR considers January a significant month for revenues because many personal income taxpayers are required to make quarterly estimated payments during the month. The month has historically generated 10.2% of annual tax revenue, DOR said.
Collections are not split evenly across the 12 months and the second half of the fiscal year (January through June) typically produces about 60 percent of the state’s annual tax revenue, officials have said. The second half of the budget year also tends to be more volatile for tax collections. DOR is due to report February collections by Wednesday, March 5. The administration’s benchmark for the month is set at $2.009 billion.
On Tuesday, Administration and Finance Secretary Matthew Gorzkowicz told the comptroller’s advisory board that the state’s finances are “certainly in a much better place than we were last year” at the same time. Last January, Gov. Maura Healey used her unilateral 9C powers to cut $375 million in spending from the fiscal 2024 budget and downgraded the revenue outlook by about $1 billion.
“I think we’re monitoring the revenues closely. I think we feel like we’re in a very good place, based on some of the adjustments we made last year and the fact that our consensus revenue number, I think appropriately, forecasted a modest growth in revenue going into ’25,” the secretary said after delivering an update on revenue collections through December.
Also Tuesday, the economists at MassBenchmarks reported that the Massachusetts real gross state product (GDP) increased at an annual rate of 1.1% in the fourth quarter of 2024, while U.S. GDP increased at an annual rate of 2.3%. The Massachusetts economy has grown more slowly than the national economy in each of the last three quarters.
“The Massachusetts economy appears to have shifted into a lower gear, with stagnant employment growth, rising unemployment, and tepid spending on items subject to regular sales taxes. This is in contrast to the U.S. economy, which may be decelerating, but is still growing at a moderate pace,” the latest notes from the MassBenchmarks board, published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston, said.
