GOV. CHARLIE BAKER saw some positive signs in the state’s tax haul in July, but he cautioned that the fiscal challenges Massachusetts is facing right now are not going away.
The state Department of Revenue reported last week that the July tax haul was $4.5 billion. That number combined revenues received from the normal course of business during the month and from the decision to move the deadline for 2019 tax payments from April 15 to July 15. Of the $4.5 billion, $2.3 billion was apportioned to fiscal 2020, which ended on June 30, and $2.2 billion was slotted to fiscal 2021, which started July 1.
At a State House press conference Tuesday, Baker said the numbers for fiscal 2020 were in line with expectations and the numbers for July were a pleasant surprise in many ways. Despite the pandemic and record-high unemployment this July, revenues were up $88 million compared to July 2019.
Withholding taxes – tax payments automatically deducted from paychecks and unemployment insurance benefits and paid directly to the government – were $80 million above year-ago levels. Baker said the regular unemployment insurance benefit plus the extra $600 payment from the federal government kept withholding tax payments up. Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said some people were making more money on unemployment than they were working.
Baker said sales tax revenues increased by $44 million, or 10.3 percent, compared to last July, while sales taxes on motor vehicles rose by $19 million, or 31.5 percent. Meals taxes, with most restaurants shuttered for most of July, were a different story. Meals taxes were down in July by $52 million, or 44.5 percent.
Baker said there is a lot of pessimism surrounding the economy right now, with unemployment high and many business sectors reeling. “But there are other areas of the Massachusetts economy that are doing, quote-unquote, OK,” he said.
Budget officials have been warning of a budget shortfall of as much as $7 billion this fiscal year. Baker cautioned about reading too much into the July numbers.
“If you’re asking me if I’m drawing lots of conclusions about what fiscal 2021 is going to look like based on July numbers, the answer to that is no,” he said. “We were pleasantly surprised by the withholding and the sales numbers, but let’s face it, there’s still a lot of challenges associated with our economy out there. It’s going to be a tough year.”