Determination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues

This is the State Auditor’s official check of whether Massachusetts collected more state tax revenue than Chapter 62F allowed for the year ending June 30, 2011.

“In accordance with the provisions of the Massachusetts General Laws, Chapter 62F, we have reviewed the Report of the Net State Tax Revenues and Allowable State Tax Revenues for the Fiscal Year ended June 30, 2011, as prepared by the Commissioner of Revenue.”

State law requires the Auditor to review the Revenue Commissioner’s numbers and independently decide whether tax collections exceeded the limit.

“Pursuant to Chapter 62F of the Massachusetts General Laws (inserted by St. 1986, C, 555, S. 2), the State Auditor is required to (1) review and ensure the completeness and accuracy of the Commissioner of Revenue’s Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2011 and (2) independently determine whether net state tax revenues exceeded allowable state tax revenues and report the determination and amount of any excess state tax revenues for the fiscal year ended June 30, 2011.”

If taxes had gone over the limit, the state would have had to provide a tax credit for the excess amount.

“Thereafter, the Commissioner shall take all the necessary action to effectuate a tax credit equal to the total amount of such excess.”

For an ordinary taxpayer, the practical result is that this audit did not create a Chapter 62F tax credit for fiscal year 2011.

“For the fiscal years ended June 30, 1988 through 2010, the State Auditor determined that net state tax revenues were less than allowable state tax revenues; therefore, no tax credit was required to be effectuated by the Commissioner of Revenue for those years.”

The state collected about $20.78 billion in net state tax revenue, while the allowed amount was about $25.06 billion, leaving collections about $4.29 billion under the limit.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues for the fiscal year ended June 30, 2011 of $20,776,233,462.11 were below allowable state tax revenues of $25,063,267,392.61 by the amount of $4,287,033,930.50 as defined in the Massachusetts General Laws, Chapter 62F.”

Because there was no excess tax revenue, the report does not call for the Commissioner of Revenue to issue a tax credit.

“For the fiscal year ended June 30, 2011, we have determined that the net state tax revenues of $20,776,233,462.11 were below allowable state tax revenues of $25,063,267,392.61 by $4,287,033,930.50 resulting in no excess state tax revenues.”

The report shows that income and sales/use taxes were the biggest sources of Massachusetts tax revenue in fiscal year 2011.

“For fiscal year 2011, $16,518,014,947.05, or 79.5% of the net state tax revenue was derived from income and sales and use taxes.”

“Allowable state tax revenues” means the legal cap on state tax collections, based on the prior year’s allowed amount and a wage-growth factor.

“As defined in Section 2 of Chapter 62F, “allowable state tax revenues” for a fiscal year means the following: beginning after June 30, 1986, an amount equal to the greater of the allowable state tax revenues for the immediately preceding fiscal year multiplied by the allowable state tax growth factor for the current year, or in any case no less than the allowable state tax revenues for the preceding fiscal year.”