Information and Updates on Current Issues
Massachusetts FY-95 Tax Revenue to reach $11.278
tax revenues will reach $11.278 billion in fiscal year 1995, about $50
million more than that forecasted by the Weld administration in its
January 1994 House-1 budget submission. (See Table 1.) FY-94 revenues
will reach $10.554, $140 million less than that forecasted by the administration.
These are the conclusions of the Beacon Hill Institute at Suffolk University
in its annual forecast of Massachusetts state tax revenues. This forecast
is derived from certain assumptions about U.S. inflation and economic
growth believed by the institute to represent the most plausible scenario
for the period January 1994 to June 1996.
and Alternative Forecasts
In its baseline forecast, the institute assumes that U.S. real (inflation-adjusted)
personal income will grow at an average annual rate of 2.8 percent over
the period January 1994 to June 1996. Two alternative forecasts assume
real-income growth rates of 2.0 percent ("slow growth") and 3.2 percent
("fast growth"). All forecasts assume an annual average inflation rate
of 3.5 percent. The institute applies econometric methods to these assumptions
to obtain its revenue forecasts. The baseline forecast shows revenues
growing by 6.30 percent over FY 93-94 and by 6.86 percent over FY 94-95.
BHI Forecast in Perspective
Whereas other forecasts assume U.S. economic growth in excess of 3 percent,
we believe that our baseline assumption of 2.8 percent is more realistic.
Recent evidence of rising employment and economic growth reflects, in
our view, an unsustainable policy of monetary expansion that is having
predictably negative effects on financial markets. The current volatility
of those markets presages rising inflation and interest rates and declining
real growth. Although the rising inflation rate wil help boost tax revenues,
the falling real growth rate will have the opposite effect, resulting
in only "moderate" revenue growth over the next fiscal year. The slow
and fast growth scenarios offered below represent what we believe to
be possible but less likely outcomes.
Massachusetts Revenue Forecasts, FY 93-96