Welcome to the Massachusetts Department of Revenue's new blog. We hope to use this blog to carry on conversations with Massachusetts residents on matters related to taxes and revenues. The blog will also provide a forum to discuss city and town finances in accordance with the work done by the DOR's Division of Local Services. Please keep in mind that this blog is not the place for the airing of individual tax matters or for formal comments on DOR rules and regulations. Questions about individual tax matters should continue to be directed to DOR Customer Service, either by using the "Contact Us" information on the website or by calling Customer Service at 1-800-392-6089 or 1-617-887-6367.
Now, with that bit of business take care of, I'd like to take a few moments to put the state's tax revenue decline in some national context. It is a natural response for residents of Massachusetts to stay focused on what happens here, but it is also worth noting that our tax revenues are declining more or less in step with other states' revenues.
The Nelson A. Rockefeller institute of Government, a nationally respected source of independent research on state and local governments, recently reported that all regions of the country were experiencing declines in personal income, sales and total tax collections in the period January-March 2009. Nationwide, tax revenue declined 12.6 percent. In Massachusetts, the overall decline in this same three-month period was somewhat steeper at 16.8 percent, driven largely by a declines of 18.7 percent in personal income tax collections. Why such a steep decline in the personal income tax? Besides and increase in unemployment and underemployment, both of which reduce wages and thus income tax collections from wages, the loss of an estimated $1.5 billion in capital gains tax income over the course of the fiscal year is the largest single factor for the decline. The exceptionally sharp decline in capital gains tax receipts for the Commonwealth this year is the result of the stock market crashes of last fall, and underscores the volatility of capital gains tax revenues.
When declines in personal income tax are combined with declines in sales tax collections due to weak consumer demand, and with reduced corporate income tax collections due to declining corporate profits, the picture of shrinking state revenues comes into clearer focus. In the fiscal year that ended June 30, 2008, Massachusetts collected a record $20.888 billion in state taxes, including nearly $2.2 billion in income taxes paid on capital gains. For the year ending June 30, 2009, we are currently projecting a much smaller collection of $18.4 billion, including a capital gains collection of just $500 million, and an even smaller collection of slightly less than $18 billion for the fiscal year that will end June 30, 2010, again with a collection of just $500 million in income taxes paid on capital gains.
These dramatic declines in revenue have precipitated a robust discussion in Massachusetts about budget cuts, reductions in services and the creation of new revenues to partially fill the hole left in the budgets of cities and towns that rely on the state for local aid payments. This type of discussion is taking place in virtually every state in the nation thanks to the ongoing national economic downturn.
The Department of Revenue reports monthly on tax collections and we will comment here on those reports as they become available. The next scheduled report on revenue will be issued on, or by June, and will be available on our website.
Prep Early for Next Tax Season posted on May 20
Filing season is finally over and we know the last thing on your mind is next tax season. But did you know that if given more prep time, you could be saving yourself lots of stress and time? Start planning for next tax season now …Continue Reading Prep Early for Next Tax Season
DOR’s Participation in the Family Court Workshops posted on Apr 22
Once a month, the Department of Revenue’s Child Support Enforcement (CSE) lawyers and staff volunteer to be a part of the Family Court Workshops for Mothers and Fathers at the Suffolk County Probate & Family Court in Boston. The workshops, a joint venture between community …Continue Reading DOR’s Participation in the Family Court Workshops
DOR Ruling Favorable in First Circuit Judgment posted on Mar 17
The United States Court of Appeals for the First Circuit issued judgments in the Department of Revenue’s (DOR) favor last month, finding that taxpayers in Bankruptcy proceedings cannot discharge late filed tax returns. The court consolidated two similar cases brought before them involving a total …Continue Reading DOR Ruling Favorable in First Circuit Judgment