December 18, 2008

Honorable Chairmen and Ranking Minority Members of the Ways and Means Committees:

Pursuant to chapter 196 of the Acts of 2008, the Department of Revenue hereby submits its midmonth revenue tax collection report for the month of December 2008. The attached table shows December 2008 month-to-date and FY2009 year-to-date tax revenue collections through December 15, 2008, along with the dollar and percentage changes from the same collection period in December 2007. Also shown are the percentage growth amounts for the full month of December 2008 and for FY2009 year-to-date through the end of December 2008 that were assumed in the benchmarks corresponding to the October 15, 2008 Executive Office for Administration and Finance FY2009 revenue estimate of $20.302 billion. Please note that the $20.302 billion estimate and the December month-to-date and year-to-date budgetary fund collection totals do not include increased cigarette tax collections resulting from the July 2008 increase in the cigarette tax, which are dedicated to the Commonwealth Care Trust Fund, a non-budgetary fund. However, the increase in cigarette tax collections resulting from the higher cigarette tax is shown in a separate line at the bottom of the table.

Through December 15, 2008, December 2008 month-to-date tax collections totaled $675 million, down $130 million from the same period in December 2007, with the full month December benchmark (based on the $20.302 billion estimate) projecting total tax revenues of $1.811 billion, a decrease of $34 million from December 2007. The month-to-date decline through December 15th was primarily the result of a decline in income tax withholding and corporate/business collections. As has been the case in recent months, the change in withholding collections at this point in the month may be due to timing factors,though it is still too early in December to know whether this will be reversed over the remainder of the month. The month-to-date decline in corporate/business taxes through December 15th was the result of a large refund paid out at the beginning of the month and a decline in quarterly estimated payments, much of which was expected and incorporated in the monthly benchmark. That benchmark forecasts a decline of $58 million in corporate/business taxes for the full month of December. While month-to-date sales taxes as of December 15th were below last year's level, some timing factors may be involved and in any event it is too early in the month to draw any conclusions about trends in this revenue source. Three additional caveats are in order when considering the attached report:

• In December, most tax collection activity occurs during the second half of the month (55%-60% of December collections are usually received in the last two weeks of the month), primarily because sales, meals, motor fuels, and rooms tax returns are due on the 20th of each month, and income tax estimated payments for the fourth quarter of the tax year begin to be remitted at the end of December. Month-to-date growth comparisons for those tax types before the third week of the month are not necessarily indicative of final collections for the full month;

• December 2008 has two more deposit days than did December 2007, which means that collections over the remainder of December 2008 could be higher than they were in December 2007. (This year's longer month was taken into account in the December 2008 monthly benchmarks.) As a result, by the end of this month collections in some revenue categories could gain ground relative to December 2007;

• There may be other differences in the due dates for certain tax payments from one fiscal year to the next (e.g., in withholding payments) which complicate month-to-date comparisons to the prior year.

As a result of these considerations, revenues received through December 15th as reported in the attached table may not be indicative of what the final results for the full month will be. Specifically, they do not represent one-half of the revenues to be received in the full month and the month-to-date growth rates compared to December 2007 could change significantly by the end of this month. Any variances from the monthly benchmark at this point in the month should not be relied on as an indicator of what total final revenues for the month will be, compared to the full month benchmarks.

If you have any questions concerning this report, please contact me (at 626-2201), or Howard Merkowitz Director of the Office of Tax Policy Analysis (at 626-2100).

Sincerely,
Navjeet K. Bal
Commissioner

Attachment
cc: Leslie A. Kirwan, Secretary of Administration and Finance
Representative Salvatore F. DiMasi, House Speaker
Senator Therese Murray, Senate President
Representative John J. Binienda, House Chair, Joint Committee on Revenue
Senator Cynthia Stone Creem, Senate Chair, Joint Committee on Revenue
Representative Bradley H. Jones, Jr., House Minority Leader
Senator Richard R. Tisei, Senate Minority Leader

December 2008 Mid-Month Tax Collections Summary (in $ millions) Collections as of December 15, 2008, Compared to Same Collection Period in December 2007 pdf format of    December_2008_Midmonth_TaxSummary.pdf