Joseph Staruski

Massachusetts Tax Revenues Surpass Pre-Pandemic Levels

/0 Comments/in , , , , , , /by Joseph Staruski
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

You heard it right, the state has too much money! In what one State House News Service reporter has called a “tax collection deluge,” the state has collected an enormous amount of money from taxpayers this year. All of this has people asking: where is all the money coming from?

Not only has revenue reached its pre-pandemic levels, but it has far surpassed them, even accounting for inflation. Compared to FY 2019, revenue is up by 38 percent according to the Pioneer Institute’s MassOpenBooks website, or 24.9 percent adjusted for inflation (using BLS inflation data).

Major Drivers of Growth

Figure 1: The relative size of Massachusetts revenue streams for the month of March 2022. The categories of “tax withheld, net” and “returns & bills & estimated payments, gross” are both part of personal income tax collection, which accounts for the majority of State tax revenue. Source: The Pioneer Institute’s MassOpenBooks Website.

The increase in personal income tax collections explains much of the increased revenue. Income taxes account for 54.3 percent of year-to-date (YTD) revenues so far. They are 40.1 percent compared to FY 2019 (See Figures 1 and 2).

The increased income tax revenue is not due to higher taxes. The income tax rate actually decreased from 5.05 percent in 2019 to 5 percent today. Therefore, something else is causing the revenue windfall.

Massachusetts residents must be bringing in significantly more money this year than in previous years. Whether that be from wage increases, job growth, industry change, or some other factor, it is a good sign for the economic prosperity in Massachusetts.

The second largest driver of increased revenue is the corporate excise tax. This tax has brought in about 10.1 percent of YTD revenues and increased by 47.8 percent since FY 2019, contributing a huge portion of revenue to state coffers.

Pandemic Recovery Indicators

Figure 2: Massachusetts year-to-date (YTD) revenues for FY2019 and FY2022 in thousands of dollars. Source: The Pioneer Institute’s MassOpenBooks Website. 

Revenue streams recovering from pandemic losses account for the rest of the increase. To assess this comeback,it is best to compare revenues for only the month of March because the recovery was less strong in the earlier months of this fiscal year (which runs from July 2021 to June 2022).

Revenue from the state’s room occupancy tax is one such stream that has fully recovered from its pandemic woes. Massachusetts charges a 5.7 percent excise tax on room rentals of 90 days or less at hotels, motels, B&B’s, and lodging houses. March revenue from this source alone is up by about 150 percent from FY 2021. But more importantly, revenue from this source is above its pre-pandemic level, with an increase of 24.3 percent over FY 2019 (11.3 percent adjusted for inflation).

The Commonwealth also has a 6.25 percent sales tax on meals purchased at restaurants. March revenue from the meals sales tax increased 60.7 percent compared to March of last year and 24.7 percent compared to pre-pandemic levels (FY 2019).

Revenue from the tax on alcoholic beverages sold at clubs has seen the most dramatic recovery of all. In March 2021, revenue from this tax was only $5,090, but it has increased 1,906 percent to $102,090. It is not a major contributor to the tax base, but it is a noteworthy recovery.

Take-Aways

Overall, this tax revenue analysis is encouraging. Examining the ways that state revenues are changing, shows how Massachusetts is changing. Revenue reflects major changes in workforce demand that have resulted in higher salaries and wages. It also shows how certain industries impacted by the pandemic are coming back to life.

Figure 3: State of Massachusetts tax revenues in March only in thousands of dollars. March is the most recent month for which this data is available. YTD revenue is not sufficient for analysis because some effects of the pandemic were still underway during the earlier part of FY2022 (which runs from July 2021 to June 2022). Source: The Pioneer Institute’s MassOpenBooks Website.

 

About the Author:

Joseph Staruski is a government transparency intern with the Pioneer Institute. He is currently a Master of Public Policy Student at the University of Massachusetts, Amherst. He was previously an opinions columnist with the Boston College student newspaper The Heights and an Intern with the Philadelphia Public School Notebook. He has a BA in Philosophy and the Growth and Structure of Cities from Haverford College. Feel free to reach out via email, linkedin, or write a letter to Pioneer’s Office in Boston.

Related Content:

Mei Xu on the Slow Burn to Success

This week on JobMakers, host Denzil Mohammed talks with Mei Xu, immigrant from China and founder of Chesapeake Bay Candle, which was acquired by Yankee Candle parent company Newell Brands for $75 million. Mei describes the journey to entrepreneurship, including a rough start, with dashed dreams and miserable timing that forced her to create opportunities for herself. Today, she seeks to empower women business owners around the world, to show them that they too can expand economies and horizons with a little guidance.

Cris Ramón on How to Build Up Immigrant Businesses

This week on JobMakers, host Denzil Mohammed talks with Cris Ramón, son of immigrants from El Salvador, immigration policy analyst, and coauthor of the new report, Immigrant Entrepreneurship: Economic Potential and Obstacles to Success published by the Bipartisan Policy Center.

Taxation Without Legislation: Exploring Inflation’s Causes, Curses & Cures

Hubwonk host Joe Selvaggi talks with Bloomberg Columnist and National Review Editor Ramesh Ponnuru about the reasons for the sustained spike in inflation, its impact on savers and consumers, the possible policy remedies, and the likely intensity and duration of this cycle.

Hubwonk360 Video: If we tax them, will they leave?

In this brief, six-minute video, Pioneer Institute Executive Director Jim Stergios and Director of Government Transparency, Mary Z. Connaughton, walk through an amendment to the Massachusetts constitution that could dramatically increase the income tax on retirees and small businesses.

Julie King Brings Authentic Mexican Cuisine to Boston

This week on JobMakers, host Denzil Mohammed talks with Julie King, immigrant from Mexico and founder of Villa Mexico Café in the financial district of Boston. They discuss the challenges of re-launching a career in a new country. It’s not atypical for an immigrant to start at a lower rung of the economic and social ladder than they previously enjoyed - but it’s a win when they persevere despite the pains, and thrive.

Lifelines for the Untethered: Research to Reach and Recover Homeless Americans

This week on Hubwonk, host Joe Selvaggi talks with Stephen Eide, Senior Fellow at the Manhattan Institute about his newly released book, Homelessness in America: The History and Tragedy of an Intractable Social Problem, in which he asserts that a better understanding of the many challenges facing each homeless individual can lead to a tailored and more durable policy solution to this enduring societal problem.

As States Compete for Talent and Families, Massachusetts Experienced a Six-Fold Increase in Lost Wealth Compared to a Decade Earlier

With competition for businesses and talent heating up across the country, in 2020 Massachusetts shed taxpayers and wealth at a clip six times faster than even just a decade ago. Between 2010 to 2020, Massachusetts’ net loss of adjusted gross Income (AGI) to other states due to migration grew from $422 million to $2.6 billion, according to recently released IRS data now available on Pioneer Institute’s Massachusetts IRS Data Discovery website. Over 71 percent of the loss was to Florida and New Hampshire, both no income tax states.

Empowered or Exploited Entrepreneurs: Voters Determine Rideshare Drivers’ Fate on November Ballot

0 Comments
/
Hubwonk host Joe Selvaggi talks with communications expert and cofounder of South & Hill Strategies Lizzy Guyton about what the research on the profiles and preferences of rideshare drivers tells us about the industry, and the possible effects of designating independent contractors as employees.

Daniel Perez Takes Tenacity to Transport

This week on JobMakers, host Denzil Mohammed talks with Daniel Perez, immigrant from Colombia and founder, president and CEO of DPV Transportation Worldwide, based in Everett, Massachusetts. Daniel shares what it meant to tap into his entrepreneurial spirit and become a success, pivoting into healthcare and community service when the transportation sector was impacted by the pandemic, and finding a way to use his fleet for good.

Searching For Space: Massachusetts Real Estate in a Time of Covid

Hubwonk host Joe Selvaggi talks with real estate expert and broker/owner Pauline Donnelly about the disruption and trends created by the Covid-19 pandemic and steps buyers and renters can take to become more informed, prudent, and competitive in the frenzied market of Greater Boston and Martha’s Vineyard.