Mass. tax collections sag as refunds demanded

BOSTON -- Revenue figures announced Wednesday gave additional insight into the state's sagging economy.

Tax collections totaled $1.257 billion during November, but that was $59 million below collections during the same month a year ago. It also was $41 million less than a revised projection for the month made just in October, Revenue Commissioner Navjeet Bal (nahv-GEET ball) said.

A day after Detroit reported the lowest auto sales in 26 years, the state said auto sales tax receipts were off 23 percent in November.

While the state had a marginal increase in income tax withholdings, it was offset by income tax refunds that were $39 million higher than a year ago.

Many individuals and businesses that made estimated tax payments -- or overpaid them in April while seeking a filing extension until October -- are now taking money back from the state as the sagging economy leaves them with less income than they expected. In the past, both groups would often let the state apply any excess funds toward the following year's taxes.

"It tells me that people expect they are not going to be paying as much in taxes next year as they did this year," Bal said. "It also can mean that people want cash. They'd rather have it now."

New York City is facing a similar situation. In the aftermath of the Wall Street collapse, the city had to refund more than $800 million to companies that overpaid their taxes based on their heartier sales of a year ago.

"For companies facing diffuclt times now, it's a way of getting cash that they may have been getting from their bank before," said Bal.

All told, November withholding collections totaled $775 million, up $22 million or 2.9 percent from 2007 and $18 million above the revised benchmark.

Sales tax collections totaled $313 million, down $19 million or 5.7 percent from a year ago and $12 million below the revised benchmark.

Like motor vehicle taxes, collections in the other two tax types -- sales and meals -- were below that of a year ago. November corporate and business tax collections totaled $7 million, down $49 million from last year and $43 million below the revised benchmark.

Gov. Deval Patrick said in mid-October the state faced a $1.4 billion budget deficit, prompting a string of budget cuts and layoffs. Earlier this week, he would not rule out additional cuts if tax collections continued to lag.

In her statement announcing the revenue figures, Bal said: "Collections in December and especially January, which is a big month for estimated payments, will provide a better indication of the state's revenue picture for the remainder of the fiscal year."

(Copyright 2008 by The Associated Press. All Rights Reserved.)