BHI FaxSheet: Information and Updates on Current Issues

Massachusetts FY-95 Tax Revenue to reach $11.278 billion

Massachusetts 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.

Assumptions 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.

The 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.

Table 1
Massachusetts Revenue Forecasts, FY 93-96
($ billions)


Forecast 1993 1994 1995 1996
BHI April 94 Forecast        
Baseline Forecast   10.554 11.278 12.016
Change (%)   6.3 6.86 6.54
Slow-Growth Forecast   10.534 11.17 11.853
Change (%)   6.1 6.04 6.11
Fast-Growth Forecast   10.571 11.414 12.218
Change (%)   6.47 7.97 7.04
Actual 9.929      
Previous BHI Forecast        
Apr-92 10.016 10.598    
Apr-93 9.921 10.306    
Administration Forecast        
93 House 1 9.94 10.46    
94 House 1   10.694 11.226  


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