BAY STATE'S COFFERS GET A REVENUE BOOST

Inflow of cash surpasses expectations by $300M

State tax collections came in above expectations for the fifth straight month in September, netting nearly $300 million more than expected, but it is unclear whether the inflows are the result of a strong local economy or a temporary spike.

“We’re trying to understand whether this is a blip related to federal tax reform, we’re still seeing those impacts, or if there’s sustained growth,” said Eileen McAnneny, president of the Massachusetts Taxpayers Foundation. “Obviously, it’s always a good news story when revenues are above projections.”

Last month, the state took in $3.223 billion, $277 million above the state’s expectations, according to the Department of Revenue. September, the fourth-largest tax revenue month for the state, usually is responsible for about 10 percent of the annual tax revenue. Monthly tax collections can be volatile, but the last time the state’s tax income was below expectations was April, with each month since then coming in strong.

Still, it is unclear what is behind the unexpected influx. Much of the increase was a result of higher-than-expected estate taxes. Estate taxes accounted for most of the $150 million over benchmark in “other” taxes, DOR said. Sales and withholding taxes, which are seen as strong indicators of the economy, were in line with expectations.

“Revenues for September exceeded the monthly benchmark, mainly driven by estate taxes, which are reflected in the ‘other’ tax grouping, and by corporate tax payments,” said Christopher Harding, commissioner of the Department of Revenue. “The Department has identified some one-time revenue events that improved September revenue performance, beyond which we see modest growth across most other tax categories, roughly in line with expectations.”

Corporate tax revenue was also strong, $98 million above expectations. It is unclear what that can be attributed to, and could be connected to corporate tax reform passed last year, said Andy Bagley, vice president for policy and research for the Taxpayers Foundation.

“We really don’t know if that’s going to be one-time or sustainable,” Bagley said.

Because the source of the revenue is unclear, McAnney said, it would be unwise to immediately spend that money.

The Department of Revenue said September tax revenue was $610 million and 9.6 percent more than a year ago. In July, DOR said FY18 tax revenue was more than $1 billion above expectations.

In a statement, a spokeswoman for Gov. Charlie Baker said the administration pushed for using last year’s extra money for school safety, public education and local infrastructure, along with growing the state’s Rainy Day Fund, but did not directly answer questions about the new unexpected revenue.