After the state received an upgraded credit rating, New Jersey reported March tax revenue collections increased 49.4% over last March when the pandemic first hit the Garden State.
New Jersey’s Treasury Department reported April 16 that March revenue collections for the major taxes totaled $2.8 billion, up $933.5 million from 12 months earlier. Fiscal year-to-date, total revenue collections of $24.3 billion are up $1.9. billion, or 8.6% above the same nine-month period last year.
The increase in revenue has been boosted by the new Pass-Through Business Alternative Income Tax (PT-BAIT) according to state officials, accounting for $1.4 billion, or nearly 75%, of the $1.9 billion year-to-date revenue increase.
Stimulus Helps Recovery
But officials cautioned credits offsetting most of these PT-BAIT payments are expected to be issued before the end of FY 2021. Additionally, the “substantial” federal stimulus enacted last year, and the improving COVID-19 outlook, have strengthened economic activity and enhanced tax collections.
March collections for the Gross Income Tax (GIT), dedicated to the Property Tax Relief Fund, totaled $1.0 billion, up $437.7 million, or 74.1% from March 2020. Year-to-date, GIT collections of $10.3 billion are up $191.1 million, or 1.9%. Collections were boosted in part by an extra weekly withholding payment, which will be offset by one less payment in April.
Compounding the financial reporting picture, Treasury noted that the extension of the income tax filing deadline to May 17 from April 15 will delay the reporting of significant GIT collections into June.
Sales Tax up 11.9%
The Sales and Use Tax, the largest general fund revenue source, reported collections of $711.9 million in March, an increase of $75.5 million, or 11.9%. Due to the one-month lag in the reporting of Sales Tax collections, March revenues reflect February consumer activity.
In a press statement, the state’s treasury department opined the federal stimulus payments have continued to help boost national retail sales and state sales tax collections. Year-to-date, Sales and Use Tax receipts of $7.1 billion are up $343.6 million, or 5.1%.
The Corporation Business Tax (CBT), which is the second largest general fund revenue source, reported $366.9 million in March, up $66.5 million—22.2% above a year ago. Year-to-date through March, CBT collections of $2.4 billion are up 3.3%.
The gain in tax revenues follows the decision by Moody’s Investor Services to upgrade New Jersey’s outlook from negative to stable due to the better than expected revenue performance in Fiscal Year 2021, and the expectation that large resulting fund balances will support budget flexibility through the coronavirus recovery.
“We are pleased that Moody’s recognized the Murphy Administration’s decision to use the stronger than anticipated revenues to build our surplus, accelerate our pension payment, and avoid incurring hundreds of millions in additional debt,” said State Treasurer Elizabeth Maher Muoio.
Maher Muoio backed Gov. Phil Murphy’s recent assertion the decision to borrow $4.4 billion was the right one even as revenue projections are higher than expected.
“We saw what happened during the Great Recession when New Jersey chose to cut its way out of a crisis and ended up being one of the last states to fully recover,” said New Jersey’s Treasurer. “Gov. Murphy’s proposed budget utilizes New Jersey’s better-than-expected revenues in a fiscally responsible way that reduces pension costs, avoids additional planned debt, and invests in the resources that will support our residents at a time when they need assistance most and make New Jersey more resilient in the face of future challenges.”