The New Jersey Department of the Treasury reported a temporary revenue boost in December 2020 due to new tax policies while the state’s unemployment rate fell by over 2%.
In the fiscal year-to-date, total collections were up 5.6% to about $14.7 billion in the same six months last year.
The Treasury credited the substantially higher collections due to the new Pass-Through Business Alternative Income Tax (PT-BAIT) program.
Changes Under PT-BAIT
The PT-BAIT program was enacted in January 2020 in order to provide relief to New Jersey taxpayers who negatively impacted by the cap on the federal deduction for state and local taxes (SALT) passed in 2017 by Congress and signed into law by President Donald Trump.
Under the program, pass-through entities can elect to pay tax on proceeds that are distributed to its owners. In return, owners claim a tax credit against their Corporation Business Tax (CBIT) or Gross Income Tax (GIT) liability.
In the long run, it is expected the tax will be revenue neutral as the taxes will result in equal credits for members. The treasury noted the program, in effect, serves as a timing shift.
CBT, GIT, Sales and Use Reports
December 2020 CBT revenue increased 34.3% to $186.3 million, with refund payments continuing to fall significantly below the prior year. Year-to-date through December, CBT collections were essentially flat at $1.8 billion.
GIT collections totaled $1.5 billion, up 18.3% from the prior year. Year-to-date, collections for GIT reached $5.8 billion, down 3%.
The Sales and Use Tax reported collections of $834 million December, up 2.6%. It represented the fifth consecutive month of growth for the category. Year-to-date, Sales and Use Tax collections of $4.5 billion are up $168.4 million, or 3.9%.
Preliminary estimates produced by the U.S. Bureau of Labor Statistics indicate that total nonfarm wage and salary employment in New Jersey decreased in December by 7,700 to reach a seasonally adjusted level of 3.9 million. Losses were recorded in both the private (-7,100) and public (-600) sectors of the state’s economy.
The state’s unemployment rate fell by 2.6 percentage points to 7.6% in December, which the state’s Department of Labor stated was primarily due to New Jersey residents leaving the labor force rather than finding employment.
In December, employment decreases were recorded in only four out of nine major private sectors. Sectors that recorded employment decreases include leisure and hospitality (-8,900), financial activities (-1,900), education and health services (-1,600) and information (-1,300).
Sectors that recorded employment increases include construction (+3,100), professional and business services (+2,900), manufacturing (+300), trade, transportation, and utilities (+200), and other services (+200). The public sector recorded a decrease of 600 jobs over the month.