BHI forecasts another year of strong growth in state tax revenues

12/13/2005

The Institute's forecasts for FY 2005 and 2006 are:

•  For FY 2006 (ending June 30, 2006): $18.028 billion, for growth of 5.5% over FY 2005.

•  For FY 2007 (ending June 30, 2007): $18.951 billion, for growth of 5.1% over the predicted level for FY 2006.

David G. Tuerck, Executive Director of BHI and Chairman and Professor of Economics at Suffolk University, presented the forecast in testimony before the joint Senate and House Ways and Means Committee and the Secretary of Administration and Finance. The Institute's forecasts for FY 2004 and FY 2005 proved closer to actual revenues than other recognized forecasts. State tax revenues grew by 7.1% over the FY 2004 and FY 2005.

“We continue to be cautiously bullish on the state economy and therefore on the outlook for state tax revenues,” says Tuerck in his prepared remarks. “Although Massachusetts lags the national economy, we see strong growth in state tax revenue through the rest of fiscal 2006. State tax revenue growth will fall off a bit during fiscal 2007 but will nevertheless reflect continued underlying strength in the state economy.”

The Institute bases its forecast on predictions that state personal income will grow by 5% through calendar years 2005 and slow to 3.8% in 2006.

BHI examined the effects on the state economy of a reduction in the personal income tax to 5% effective January 1, 2007. Using its State Tax Analysis Modeling Program (STAMP), BHI found that the tax cut would create 7,827 new jobs, $456 million in disposable income and $15.7 million in new capital spending. Taking into account these “dynamic” effects, the predicted tax revenue for FY 2007 would be $18.699 billion , $252 million less than the amount predicted above.

The Institute's Massachusetts Tax Revenue Forecasts for FY 2006 and FY 2007 may be obtained at www.beaconhill.org or by calling BHI at 617-573-8750.

 

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