Massachusetts may lose out on $650 million in state income due to the tax breaks and spending cuts invoice President Donald Trump signed over the summer season, a large finances shocker that might go away Beacon Hill Democrats scrambling to plug holes.
The revelation that Bay State finances writers may have greater than half a billion lower than initially projected to work with this fiscal 12 months comes weeks earlier than they need to verify or revise income expectations, and because the federal authorities sits on the precipice of a shutdown.
Division of Income Commissioner Geoffrey Snyder stated the “One Big Beautiful Bill” modifications over 100 provisions within the federal tax code and about 30 will set off an affect on collections in Massachusetts.
“Overall, we project that the (One Big Beautiful Bill) will reduce state tax collections by more than $650 million in fiscal year 2026,” Snyder informed finances writers Tuesday afternoon at an financial roundtable within the State Home. “Because it was enacted on July 4, the impact was not captured in FY26’s full fiscal year revenue benchmark of $43.6 billion.”
Home finances chief Aaron Michlewtiz stated the prospect of dropping $650 million “at any point in time is significant and daunting, to say the least, for us as budget writers to figure out what to do with.”
Gov. Maura Healey has warned for months that Massachusetts may face monetary hardships due to Trump’s “One Big Beautiful Bill,” which he signed into legislation the identical day Healey authorised a $61 billion state finances for fiscal 12 months 2026.
The primary-term Democrat has sought to develop her budget-cutting powers forward of potential financial complications this fiscal 12 months. She additionally delayed funds for native tasks, and even warned lawmakers that her administration would slash native spending if the economic system tanked.
Lawmakers grappled Tuesday with whether or not and by what extent they need to decouple Massachusetts tax codes from federal requirements, a transfer that may reduce the affect of the federal invoice Trump signed in July.
Senate finances chief Michael Rodrigues stated linking federal and state tax codes is sweet as a result of it simplifies tax submitting for residents and companies. However it may be harmful, he stated, “in situations like when the federal government does these big tax changes.”
“Remember, that has a direct impact on our revenue,” the Westport Democrat informed reporters. “It has an impact on federal revenue. But they really don’t care, because if their revenue numbers fall short, they just print more, right? … We can’t print more money like the feds.”
Healey and legislative finances writers left about $800 million in anticipated revenues unspent within the fiscal 12 months 2026 finances in case federal coverage choices created a difficult financial setting for the state.
However whether or not the $800 million will take up the $650 million in misplaced income on account of the “One Big Beautiful Bill” is unclear, and it’s nonetheless not a assure that Massachusetts will even acquire sufficient tax income this fiscal 12 months to create the cushion as lawmakers supposed.
Administration and Finance Secretary Matthew Gorzkowicz stated that how the roughly $800 million might be used whether it is collected “has yet to be decided.”
“There are many competing interests that have to be considered when thinking about how to apply that,” he stated.
Michlewitz stated the state officers don’t but have the $800 million in hand.
“That’s got to get collected over the fiscal year for it to work,” he stated. “It’s what we’re budgeting for, but we still have to go through the fiscal year to have an understanding of what the final number will be.”
Tax collections in fiscal 12 months 2025 got here in about $2.1 billion, or 5%, above projections set by Healey’s budget-writing workplace and state lawmakers, Snyder stated. The year-over-year improve was largely pushed by a 4% surtax on excessive earners and capital good points taxes, Snyder stated.
Fiscal 12 months 2026 tax collections by August totaled about $5.5 billion — $175 million or 3.3% greater than this time final fiscal 12 months, Snyder informed finances writers. July and August are two of the smaller months as a result of neither people nor companies make important estimated funds, in keeping with Snyder.
“September is the first significant month in the fiscal year, and as of Sept. 25, collections are showing little to no growth versus last year,” Snyder stated.
Whether or not Massachusetts will meet fiscal 12 months 2026 income projections continues to be an open query, and Bay State Price range writers face an Oct. 15 deadline to revise or certify how a lot money the state is anticipated to usher in by the top of June 2026.
Gorzkowicz didn’t say if the Healey administration plans to regulate income projections like January 2024, when officers downgraded expectations for fiscal 12 months 2024 by $1 billion and unilaterally slashed $375 million in spending from the state finances.
“We know we have a decision to make by Oct. 15, which is when I have to certify revenues are sufficient to meet expenditures, and we’ll evaluate it all and have an answer then,” Gorzkowicz stated.
Gorzkowicz additionally didn’t supply an replace on whether or not the Healey administration deliberate to chop money for native earmarks.
“We communicated early on with leadership in both the House and Senate that we were going to hold off on paying out earmarks until we understood what the first quarter of the fiscal year looked like. We’re now receiving those numbers, and we’ll evaluate those once we have them, those being the September numbers,” he stated.
Ella Adams/State Home Information Service
Senate Methods and Means Chair Michael Rodrigues (left), Administration and Finance Secretary Matthew Gorzkowicz (middle), and Home Methods and Means Chair Aaron Michlewitz (proper) sit at a mid-year financial roundtable on the State Home on Sept. 30, 2025. (Ella Adams/State Home Information Service)
