BHI FaxSheet: Information and Updates on Current Issues

BHI predicts $81 million FY-96 Tax-Revenue Shortfall

March 1995

Massachusetts FY-1996 tax revenues will be $81 million less than the Weld administration predicts in its January 1995 House-1 budget submission. According to the Beacon Hill Institute's "baseline" estimate for FY 1996, tax revenues will reach $11.674 billion (see Table 1, Line 1). The comparable Weld administration estimate is $11.755 billion.

Looking ahead to FY 1997, BHI estimates baseline tax revenues of $12.135 billion. This reflects a gradual decline in the expected growth of Massachusetts tax revenues, brought about by an expected slowdown in U.S. economic growth and by a more pronounced slowdown in Massachusetts economic growth.

Alternative Estimates
BHI's baseline estimate assumes no tax cuts. If tax cuts proposed by the Weld administration are factored into the estimate, the BHI estimate for FY 1996 is $11.641 billion, $33 million less than the baseline estimate.

BHI has prepared "pessimistic" and "optimistic" estimates that allow for slower and faster-than-expected growth in the U.S. economy after CY 1995. FY-1996 revenues are $11.655 billion for the pessimistic estimate and $11.701 billion for the optimistic estimate (Lines 3-4).

BHI's Track Record
In April 1994, BHI predicted that FY-1995 tax revenues would reach $11.278 billion (Line 5). This is within 1% of the now-expected amount. BHI's current estimate for FY-1995 tax revenues is $11.169 billion (Line 1). The administration's current estimate is $11.179 billion.

Table 1
Beacon Hill Institute Revenue Estimates, FY 1995-97

Taxes For Budget ($billions)    
    FY 1995 FY 1996 FY 1997
1 March 1995 Estimates Baseline Estimates 11.169 11.674 12.135
2 Change from Previous Year 5.30% 4.52% 3.95%
3 Pessimistic Estimate   11.655 12.072
4 Optimistic Estimate   11.701 12.208
5 April 1994 Estimate 11.278