AuditDetermination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues -- Fiscal Year 2020

This is the State Auditor's review of whether Massachusetts collected more tax revenue than state law allowed for fiscal year 2020.

“In accordance with the provisions of Chapter 62F of the Massachusetts General Laws, we have reviewed the Report of the Net State Tax Revenues and Allowable State Tax Revenues for the fiscal year ended June 30, 2020, as prepared by the Commissioner of Revenue.”

The audit checked whether the Department of Revenue's report was complete and accurate, and whether tax collections crossed the legal limit.

“Our review was conducted for the purposes of ensuring the completeness and accuracy of the report and determining whether the net state tax revenues for the fiscal year ended June 30, 2020 exceeded allowable state tax revenues for that fiscal year.”

If taxes had exceeded the limit, the law would require a tax credit process. Since they did not, no such credit was required by this report.

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

For ordinary taxpayers, the practical result is that this fiscal 2020 report did not create a taxpayer credit under Chapter 62F.

“For fiscal years 1988 through 2019, 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 $30.16 billion in net tax revenue, which was about $5.35 billion under the allowed amount.

“We have determined that the net state tax revenues of $30,164,388,908 for the fiscal year ended June 30, 2020 were below the allowable state tax revenues of $35,514,892,070 (as defined in Chapter 62F of the General Laws) by the amount of $5,350,503,162.”

Because the Auditor found no excess revenue, the report does not direct a Chapter 62F tax credit for fiscal 2020.

“For the fiscal year ended June 30, 2020, we have determined that the net state tax revenues of $30,164,388,908 were below the allowable state tax revenues of $35,514,892,070 (as defined in Chapter 62F of the Massachusetts General Laws) by $5,350,503,162, resulting in no excess state tax revenues (see Exhibit I).”

The report is significant because it applies a voter-era tax limit law to a full year's state tax collections and confirms fiscal 2020 stayed far below that limit.

“For fiscal years 1987 through 2020, net state tax revenues increased approximately 272%, from $8,102,373,437 to $30,164,388,908.”

Chapter 62F is the law that caps how fast state tax revenue can grow, using growth in Massachusetts wages and salaries as the measuring stick.

“This chapter provides for the establishment, for each fiscal year beginning with the fiscal year ended June 30, 1987, of a state tax revenue growth limit, calculated on the basis of the level of growth in total wages and salaries of the citizens of the Commonwealth.”