- Massachusetts Department of Revenue
Wednesday, November 4, 2009
Robert R. Bliss
October revenues are slightly above benchmark due to better than expected withholding tax payment and estate tax payments; however corporate and income tax refunds are also higher than expected.
Revenue Commissioner Navjeet K. Bal today announced that preliminary revenue collections for October 2009 totaled $1.223 billion. While October is one of the smaller months for tax revenue collections, it is a significant month for income tax and corporate refunds.
Total tax collections were $22 million above the monthly benchmark based on the October 15th FY10 revised tax revenue estimate of $18.279 billion and were up $72 million or 6.3 percent from last October. October's results are consistent with the October 15th revision, which reduced the FY10 estimate by $600 million from what was assumed in the original FY10 budget enacted in July. The $72 million revenue increase from October 2008 was due mainly to one-time events affecting October 2008 and 2009 tax collections, timing issues, and the recently enacted sales tax increase.
October income tax collections totaled $649 million, a decline of $132 million, or 17.0% from last year. Withholding collections totaled $672 million, down $53 million or 7.3 percent from a year ago and $28 million above the revised benchmark. The revised October benchmark assumed that withholding collections would be down $81 million from last October, with $49 million of that decline due to an anticipated calendar-related shift that pushed revenues from October to November, and the remaining $32 million decline due to the weak economy. While the $49 million calendar-related shift did in fact occur, a number of other timing-related factors not reflected in the October benchmark appear to have caused October's above-benchmark withholding results, and these same factors may result in below-benchmark performance in November, which would reverse the October gains.
Income tax refunds totaled $117 million, up $38 million, or 48.4% from last year, $17 million above benchmark, as taxpayers who filed tax year 2008 extensions in April of this year claimed refunds on returns filed on October 15th, probably as the result of lower capital gains and other investment income. The Department will continue to process income tax refunds through at least the end of November, and if November refunds continue at their recent high level there could be further revenue losses relative to the revised income tax refund benchmark.
October sales tax collections totaled $404 million, up $60 million or 17.5 percent from a year ago and $6 million above the revised benchmark, with the increase the result of the higher sales tax rate and removal of the exemption for alcoholic beverages.
October corporate and business tax collections totaled $14 million, up $134 million from a year ago (when collections were -$120 million due to refunds) and $13 million below the revised benchmark. The October 2009 corporate and business increase was entirely the result of one-time events, including $95 million in non-recurring refunds paid in October 2008, and $66 million in non-recurring financial institutions payments received in October 2009 (which may be offset by a refund request later in FY10), both of which were incorporated into the revised benchmarks. The $13 million shortfall from the corporate and business benchmark was primarily the result of higher than projected refunds of tax year 2008 overpayments, some of which was due to use of transferable tax credits.
"The October results are consistent with the revised revenue estimates of October 15th," said DOR Commissioner Navjeet K. Bal. "Income tax collections are considerably less than a year ago. Consumer spending, as measured by sales tax revenue, would have been down for the month 5.5 percent if not for the rate increase, and corporate collections were under benchmark. We will continue to monitor tax collections over the next several months to make sure that revenues are lining up with estimates."
Also of note is that October estate tax collections totaled $31 million, up $11 million or 53.8% from a year earlier, $15 million above the revised monthly benchmark. The $15 million estate tax surplus also should be considered a one-time event and not a trend, as estate tax payments are volatile and difficult to predict from month-to-month.
FY09 year-to-date tax collections total $5.535 billion, down $405 million or 6.8 percent from the same period a year ago and $22 million above the YTD benchmark based on the revised Oct. 15 revenue estimate. While YTD income tax collections of $3.055 billion are $496 million behind those of a year ago, sales and use tax collections of $1.473 billion are up $86 million or 6.2 percent and corporate and business tax collections of $441 million are up $19 million or 4.5 percent.