Post Content

DOR released its January revenue report Tuesday afternoon, just as the latest snow event commenced. There was a blizzard of good news in the report as revenues came in at $2.053 billion, up $208 million or 11.3 percent from January 2010.

Collections were strong across the board, with the only below benchmark collection (other than income tax refunds paid) in corporate and business tax, for which January is a small month anyway.

Two tax types — sales and income tax cash estimated payments — are worthy of a closer examination.

Sales tax reported in January reflects December activity, since sales tax is reported on the 20th of the month following. Regular sales tax (excluding meals and motor vehicles) collection was up $21 million or 6.1 percent from January of a year ago. That is a sign of consumer confidence in a recovering economy.

Income tax cash estimated payments are made when taxpayers have experienced an unexpected gain in income, most frequently, from the sale of stock or some other asset that is reported as a capital gain. It was a precipitous drop in capital gains that triggered the massive falloff in revenue collection in FY09, when the collection fell from $20.88 billion in FY08 to $18.259 billion in FY09.

 FY11 is seeing a modest recovery in this area. For the first seven months of the current fiscal year, income tax cash estimated payments total $1.199 billion, up $239 million or 24.9 percent from the same period a year ago.

There are a couple of theories on this increase. One is that some investors, not knowing if the Bush-era tax cuts would be extended or eliminated, sold off assets in 2010 to avoid paying a higher tax in 2011 (a scenario that did not come to pass when President Obama agreed to extend the tax cuts.) If this indeed happened, the state would see an increase in estimated payments. The other possibility is that as the economy recovers, and investors recover, they are selling stocks to realize capital gains, and having to pay tax on those gains. 

When all is said and done, the state has collected $1.091 billion more than in the same seven months a year ago. The return of income from capital gains is playing a part in that. How much of these estimated payments will be reclaimed as refunds in April, when taxpayers "true up" their returns, remains to be seen. 

(Editor's note: For a review of capital gains collections, see page 20 of the Consensus Revenue Hearing briefing book for FY12.)

Written By:

Recent Posts

Your Mass State Taxes Made Easier posted on Mar 9

Your Mass State Taxes Made Easier

With the tax season now in full swing, there are several resources at your fingertips to make filing your taxes hassle-free. Enhanced Website Earlier this year, we launched a new DOR homepage, making it faster now to find exactly what you need to file and   …Continue Reading Your Mass State Taxes Made Easier

3 Steps to Catch Up on Back MA Taxes While Avoiding Penalties posted on Mar 4

3 Steps to Catch Up on Back MA Taxes While Avoiding Penalties

Watching a game-winning goal in overtime is as exciting as hockey gets. With DOR’s MA TAX AMNESTY 2016, you can stay out of the penalty box by paying only what you owe. Read on to find out more. What is MA TAX AMNESTY 2016? It’s   …Continue Reading 3 Steps to Catch Up on Back MA Taxes While Avoiding Penalties

EITC – Helping Low and Moderate Income Families in MA posted on Jan 29

EITC, also known as the Earned Income Tax Credit, has been helping low to moderate income families in Massachusetts and across the country for over 40 years. In recent months, Governor Charlie Baker and members of the Legislature have worked hard to ensure that working   …Continue Reading EITC – Helping Low and Moderate Income Families in MA