Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the State Revenue Forecast topic
No spam. Unsubscribe anytime.
Revenue officials: OB3 will cut state revenue hundreds of millions, surtax and capital gains pose April risk
Summary
Department of Revenue testified that OB3 will reduce state tax collections by an estimated $664 million in FY2026 and $282 million in FY2027 and warned that surtax and capital‑gains volatility make April a critical hinge for the budget.
The Department of Revenue told the joint House and Senate Ways and Means committees that federal tax changes and market volatility have created a narrow margin for error as lawmakers set a consensus revenue figure for fiscal 2027.
"We estimate that OB3 will result in a $664,000,000 revenue loss in FY '26," said Jeff Snyder, Commissioner of the Department of Revenue, citing about $442 million from conformity provisions and $222 million tied to the increase in the SALT cap. DOR estimated a $282,000,000 loss in FY '27.
DOR presented a range for FY26 revenue that—after accounting for OB3 and surtax collections—spans roughly $155 million below to $563 million above the existing benchmark and forecast FY27 revenue to be 1.2% to 3.1% higher than their FY26 projection. On surtax, the department expects FY26 collections to exceed the benchmark by several hundred million dollars but projects a substantive decline in FY27 tied to financial‑market expectations.
Committee members pressed DOR on the prospect of a ballot initiative that would cut the state income tax from 5% to 4%. DOR staff said annualized revenue losses could be in the $4.2 billion to $4.8 billion range, with a smaller phased impact on FY27 depending on timing and taxpayer behavior.
Independent analysts at the hearing offered different views. Tufts' Evan Horowitz warned that increasing reliance on capital gains and the so‑called millionaires tax makes collections more volatile, noting that capital‑gains receipts can lag market movements and that April tax filings are an especially important hinge point for identifying large swings in revenue.
The department identified key near‑term risks: shifts in federal grant funding, cuts to research and development grants, tariff and trade policy changes, and Federal Reserve actions that influence markets and real estate activity. DOR concluded its testimony noting modest growth in many tax categories but emphasized limited margin for error and the need for conservative planning.
The committee will incorporate these forecasts and risk assessments as it develops a consensus revenue number to guide the FY2027 budget.
