AuditDetermination of Whether Net State Tax Revenues Exceeded Allowable State Tax Revenues -- Fiscal Year 2021

This is the State Auditor’s review of whether Massachusetts tax collections stayed within the limit set by Chapter 62F for the year ending June 30, 2021.

“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, 2021, as prepared by the Commissioner of Revenue.”

The audit was required by law to check the Department of Revenue’s report and decide whether the state collected too much in taxes.

“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, 2021 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, 2021, which were the objectives of this audit.”

If state tax collections go over the legal limit, the state must return the excess through a tax credit.

“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 there was no Chapter 62F tax credit for fiscal year 2021 because collections were under the limit.

“For fiscal years 1988 through 2020, 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 $34.66 billion in net taxes, which was about $2.13 billion below the allowed amount.

“As a result of our review and as disclosed in the accompanying report, we have determined that the net state tax revenues of $34,655,837,068 for the fiscal year ended June 30, 2021 were below the allowable state tax revenues of $36,789,926,416 (as defined in Chapter 62F of the General Laws) by the amount of $2,134,089,348.”

Because the Auditor found no excess revenue, the report does not require the Commissioner of Revenue to issue a tax credit for this year.

“If the State Auditor determines an excess of state tax revenues, she shall report that determination and the amount by which allowable state tax revenues were exceeded to the Governor, the President of the Senate, the Speaker of the House, the respective Chairs of the Committees on Ways and Means of the Senate and House, and the Commissioner.”

Income taxes and sales and use taxes made up most of the state tax revenue reviewed, so those categories drove much of the overall picture.

“During this fiscal year, $27,511,972,343, or approximately 79% (see Exhibit III), of the net state tax revenues were derived from income and sales and use taxes, which are traditionally the largest sources of revenue received by the Commonwealth.”

The tax limit is tied to growth in Massachusetts wages and salaries, not simply to whether tax collections went up.

“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.”