State Kicks Off Fiscal 2025 With Drop In Tax Revenue
No Announcement Yet About Year-End FY24 Performance
AUG. 5, 2024…..State tax collectors kicked off fiscal year 2025 by bringing in $2.648 billion in July, $18 million or 0.7 percent less than last July, the Department of Revenue said Monday.
While last month’s take trailed July 2023 by less than a percentage point, DOR said the gap would have been larger if not for a quirk of timing. The agency said roughly $60 million of July’s revenue “reflects a shift in collections between months because of timing, without which July 2024 revenue would be about $78 million or 2.9% less than actual collections in July 2023.”
July’s collections are the first of fiscal year 2025, a budget year during which the Healey administration and key lawmakers anticipate the state will collect $40.202 billion in general tax revenue plus at least another $1.3 billion in revenue from the state’s surtax on high earners. July generally produces 6.7 percent of annual revenue, DOR said.
“July revenue included decreases relative to July 2023 collections in withholding, non-withheld income tax, and ‘all other’ tax,” Revenue Commissioner Geoffrey Snyder said. “These decreases were partially offset by increases in sales and use tax, and corporate and business tax. The decrease in withholding reflects current labor market conditions as well as periodic fluctuations. The decrease in ‘all other’ tax is due, in part, to estate tax, a category that tends to fluctuate.”
Some on Beacon Hill were bracing for what Senate Ways and Means Chairman Michael Rodrigues said last week would be “very bad news” with the release of July’s receipts.
“We know that we’re going to have some very bad news on the economic front in just the next few days, that July’s [state tax revenue] numbers are going to be very bad. July is a small month, by the way, so it’s concerning for all of us,” Rodrigues said early Thursday morning.
It is unclear exactly what is so concerning to the chairman, and Rodrigues’ office did not respond Monday to a request to speak with him.
July’s revenues were not compared to monthly or year-to-date benchmarks because they have not yet been established. That is expected to happen by the end of the month, DOR said.
And the first month of results from fiscal 2025 comes before the state has finished counting and processing all revenue from fiscal year 2024, which ended June 30.
DOR typically has to report on the previous month’s tax collections by the third business day of the new month. But for June, the last month of the state’s fiscal year, the administration can under state law withhold the information that completes the fiscal year’s picture until “the day after the department completes the processing of June tax revenues.”
On Monday, DOR said “June 2024 and full Fiscal Year 2024 revenue collections will be available once DOR completes the processing of June revenue.”
It did not always take DOR this long to process June and year-end revenues, and last year’s Aug. 11 report was the latest in at least 20 years, according to the agency’s archive of its press releases.
From 1999 through 2001 and again from 2003 through 2019, year-end tax revenues and June collections were made public in July. In 2020, which saw tax filing deadlines moved as a result of the pandemic, DOR reported preliminary year-end results on July 24. The release extended into August in each of the last three years, coming on Aug. 3 in 2021, Aug. 4 in 2022 and Aug. 11 in 2023. DOR also reported June and year-end revenues in mid-August 2002, according to News Service reporting from the time, though the exact date is not available in DOR’s press release archive.
DOR said the recent trend of year-end revenues being released in August is largely due to a legislative change that required certain taxpayers starting April 1, 2021 to remit an advanced payment of the tax to be reported on sales and use tax returns, meals tax returns, and room occupancy excise returns.
Advanced payments are due the 25th day of the month that constitutes the taxable period, but the associated tax returns and any remaining portion of the tax amount owed are generally due the 30th of the following month. Advanced payments are usually remitted in one lump sum but may include multiple tax types, and DOR said it doesn’t have all the information necessary to appropriately account for those advanced payments until the returns come in.
For most of the fiscal year, DOR can account for advanced payments received in one month in the following month — for instance, April advanced payments can be accounted for in May. But for the last month of the fiscal year, DOR is required to account for June advanced payments in the month of June, which means June revenues cannot be finalized until DOR gets the associated tax returns by July 30th.
Once those returns are in, the department said, it can take up to two weeks to finish processing June tax revenues.
The June revenue report will say a lot about the state’s financial picture, and the year-end figures could shed more light on just how much of a factor above-threshold capital gains revenues and revenue from the income surtax were in the April reversal of fortunes.
April collections beat the monthly benchmark by more than $1 billion or nearly 20 percent, swinging the state from being $145 million in the red up to that point to beating projections by $889 million. But much of that overage came from revenue sources that are to be set aside for specifically mandated purposes and cannot be used to support general budgeted spending.
