STATE TAX REVENUES continued to slide in January, as collections came in nearly 7 percent below a target that was revised downward just last month.

The slipping tax collections create more headaches for Gov. Maura Healey. With revenues running behind what had been forecast over the first six months of the fiscal year, the governor last month pared back the state’s annual revenue forecast by $1 billion and plugged the resulting budget gap by unilaterally cutting spending by $375 million and tapping $625 million in so-called non-tax revenue – primarily interest skimmed off of state bank accounts.

The goal was to deal with a looming budget shortfall quickly and bring the budget back into balance. But the new January numbers suggest the problem may not be fully resolved.

Revenue Department officials said revenues in January came in 6.8 percent, or $263 million, below what had been forecasted for the month. For the first seven months of the fiscal year, revenues were 1.2 percent off forecasted levels. Compared to the previous fiscal year, revenues were down 6.9 percent in January and 1 percent for the first seven months.

Income tax withholding collections, typically a key economic barometer, also dropped in January. They were 3.1 percent less than had been forecasted and 2.4 percent less than January 2023. The downturn was a shift for a tax revenue stream that has been performing well — up 4.9 percent over the first seven months of the fiscal year. Sales tax revenue, which has been sluggish most of this fiscal year, rebounded slightly in January.

“While the evidence is far from definitive, this latest report feeds my concern that the weakness may be spreading from tax returns to the economy more broadly,” said Evan Horowitz, the executive director of the Center for State Policy Analysis at Tufts University. “Up to now, the clearest sign of this has been weak sales tax receipts, suggesting something off with consumer activity. But this month we also have weak income withholding–which means falling paychecks.”

Doug Howgate, president of the Massachusetts Taxpayers Foundation, said he didn’t want to read too much into a single month. But he acknowledged the situation is fluid. “There continues to be downside risk in fiscal 2024,” he said.

Howgate also pointed out that January 2023 was the first time the state began collecting the new 4 percent surtax on income over $1 million, which means last month (January 2024) was the first time one could make an apples-to-apples comparison of all of the state’s revenue sources. He noted tax revenue overall was down 6.9 percent in January 2024 compared to January 2023.

“It says what we thought was a bright spot [the new surtax on income over $1 million] may not be as big a bright spot,” he said.