By Michael Norton
STATE HOUSE NEWS SERVICE
STATE HOUSE — November tax collections were strong enough to trip the trigger requiring the state income tax rate to drop to 5.15 percent from 5.2 percent on Jan. 1, 2015.
The Department of Revenue on Wednesday reported collecting $1.59 billion in taxes in November, a 1.5 percent increase over last November.
Tax collections missed the monthly benchmark by $9 million and are trailing the fiscal 2015 benchmark by just over $40 million.
Gov. Deval Patrick last month cited the income tax cut, worth $70 million this fiscal year, as well as underperforming non-tax revenues and the challenge of paying for a job creation law passed last summer as reasons for opening up the $36.5 billion budget and making spending cuts.
Patrick slashed $198 million in spending unilaterally and asked lawmakers to pass other spending cuts. Legislative leaders have not taken action on his proposal, while taking a dim view of his call to reduce local aid to cities and towns by more than $25 million.
House Ways and Means Committee Chairman Rep. Brian Dempsey told the News Service Wednesday that he hopes to advance a budget-balancing bill through the House during December’s lightly attended informal sessions and before Governor-elect Charles Baker takes office in January. Dempsey said he is actively examining a corporate tax amnesty program recommended by House Minority Leader Brad Jones and is still reviewing Patrick’s plan for spending cuts at state departments.
Massachusetts voters in 2000 passed an initiative petition calling for a 5 percent income tax rate. Rate reduction efforts were frozen in 2002, when a set of triggers was adopted to guide further rate cuts.
Over the first five months of fiscal 2015, tax collections are up 2.7 percent over the same period in fiscal 2014. The state budget signed by Patrick in July calls for a 5.6 percent increase in spending.
Revenue Commissioner Amy Pitter reported Wednesday that tax refunds in November were greater than expected while sales, corporate and business tax collections were lower than expected. Withholding collections were strong, revenue officials said, and individual estimated tax payments were better than expected.
A two-month tax amnesty program that allowed delinquent taxpayers to pay up without paying penalties ended on October 31, and revenue officials are preliminarily estimating $57 million in payments made in connection with that program.
Reacting to the income tax cut, the Massachusetts Budget and Policy Center noted Patrick’s recent spending cuts to school transportation, job training, health care, and “other investments that support and strengthen our people and our economy.” Center officials said the income tax reduction was a reason for the spending reductions.
“While our Commonwealth could be making investments to expand opportunity for all of our children and improve lives in our communities, this automatic tax cut will primarily benefit the wealthy and it will likely force cuts in education, transportation, and other investments in our people and our economy,” MassBudget President Noah Berger said in a statement.