Annual tax revenue collection in Massachusetts fell by 4.7% in fiscal year 2023, the State Department of Revenue announced in its yearly report released Friday.
The state collected $39.2 billion in fiscal 2023, $1.94 billion less than in fiscal 2022 and 1.5% below the state’s set benchmark, the report said.
Officials attributed the year-over-year dip to a changing tax landscape post-pandemic.
Revenue Commissioner Geoffrey Snyder said in a statement that the figures can be attributed to a fall in non-withholding income tax, mostly linked to a decrease in capital gains tax collections relative to last year’s unprecedented collections, and an increase in pass-through-entity members applying credits to reduce their tax payments.
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“These decreases were partially offset by increases in withholding and sales and use tax,” Snyder said. “The increase in withholding was driven by current labor market conditions and the increase in sales and use tax was driven, in part, by continued strength in retail sales.“
The DOR said preliminary capital gains tax revenue on the year totaled $2.237 billion, $833.6 million of which was transferred to the Stabilization Fund, the State Retiree Benefits Trust Fund, and the Pension Liability Fund.
The report also announced June’s monthly revenue collections of $4.1 billion $6 million less than actual collections in June 2022, but $394 million or 10.5% above benchmark
The June figure marks a stabilization after the state posted a dramatic revenue decline earlier in the year.
In April, the DOR reported that collections for the month were down 31% year-over-year, falling $2.163 billion from April 2022 and missing the state benchmark by $1.435 billion.
In April, S&P Global Ratings upgraded Massachusetts’s general obligation long-term credit rating to AA-plus from AA recently citing a strong rebound from the pandemic, stronger budget management, and improved reserves.
Moody’s Investors Service rated Massachusetts’ recent $1.2 billion GO bond sale Aa1 with a stable outlook, attributing the decision to “expectation that the commonwealth will continue its trend of strong financial management, taking proactive measures to navigate challenges that could emerge if the economy slows over the near term.”
Massachusetts’s tax-backed debt totaled $47.7 billion, Moody’s said.
Fitch Ratings assigned its AA-plus rating with stable outlook to the state’s GO sale.
In June, the state concluded an upsized pricing of $1.241 billion of GO refunding bonds that saw yields bumped two to seven basis points from the preliminary pricing of $993.465 million of GO refunding bonds in a deal managed by J.P Morgan and UBS.