Beacon Hill Institute: State Tax Revenues Will Rise Slowly

12/13/2007

After examining current economic conditions and future prospects for economic growth, the Beacon Hill Institute today released its
forecasts of Massachusetts state tax revenues for fiscal years 2008 and 2009. The Massachusetts economy is expected to continue to expand, but less quickly than over the past two years.  As a result, revenue growth will grow by 2.4 percent in FY 2008 -- down from the 6.8 percent increase seen in FY 2007 -- before rebounding to a 4.1 percent growth rate in FY 2009.

The Institute's forecasts for state tax revenues for FY 2008 and 2009 are:

  • For FY 2008 (ending June 30, 2008):  $20.201 billion, for growth of 2.4 percent over FY 2007.
  • For FY 2009 (ending June 30, 2009):  $21.038 billion, for growth of 4.1 percent over the predicted level for FY 2008.

Jonathan Haughton, Senior Economist at the Beacon Hill Institute, and Professor of Economics at Suffolk University, presented the forecast in testimony before the revenue hearing conducted under the auspices of the Joint Ways and Means Committee and the executive Office of Administration and Finance.

“Although the growth of state GDP will ease in the months ahead, we do not expect a recession,” said Haughton in his testimony at the Gardner Auditorium at the State House.  “Tax revenues will mirror this trend, growing relatively slowly in the current fiscal year but rising more rapidly by 2009, at which point they will increase in line with the long-term historical trend.” 

The Institute predicts that state personal income growth will slow to 4.9 percent in calendar year 2008, after rising by an estimated 6.2 percent in 2007.  The main drag on the economy continues to be the effects of the sub-prime lending disaster, which has reduced residential investment and made consumers and investors jittery.  But continued strength in health services and education, as well as exports (boosted by a weak dollar) will ensure that the state will not slide into recession in 2008 or 2009.

The Beacon Hill Institute provides policy analysis through its State Tax Analysis Modeling Program (STAMP).  Information about STAMP and a copy of the Institute's Massachusetts Tax Revenue Forecasts for FY 2008 and FY 2009 may be obtained at the Beacon Hill Institute

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