September 4, 2018

2019 tax income cut more possible after $5.5% revenue growth

Photo | Courtesy
The Massachusetts State House.

For the first time in three years, Massachusetts taxpayers may be in line for another slight income tax cut in January 2019 after tax revenue growth in fiscal 2018 exceeded the threshold needed to meet the first trigger for a reduction.

Department of Revenue Commissioner Christopher Harding wrote to Baker administration budget chief Mike Heffernan on Thursday informing him that baseline tax revenue growth in fiscal 2018, adjusted for inflation, grew by 5.485 percent, well in excess of the 2.5 percent growth needed to meet the first of five triggers that must be met to reduce the rate from 5.1 percent to 5.05 percent in 2019.

Tax revenues of $25.9 billion in fiscal 2018 were up more than $2.1 billion from the prior year, according to a copy of the letter obtained by the News Service. For the income tax cut to go into effect, tax revenues must exceed the prior year's collection for the next four consecutive, three-month periods from Sept. 15 through Dec. 15.

Gov. Charlie Baker and legislative leaders anticipated the income tax in January when they built the state's fiscal 2019 budget, assuming a reduction of $83 million in income tax revenue from the cut, which would be the second-to-last before the income tax reaches its destination of 5 percent.

Voters in 2000 approved a ballot question to roll back the state's income tax from 5.75 percent, but two years later legislators froze the income tax at 5.3 percent and imposed triggers to continue incremental reductions until it reaches 5 percent. Tax revenues in fiscal 2016 and fiscal 2017 were insufficient to trigger a cut. - Matt Murphy/SHNS

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