Despite promising signs for New Jersey’s sales tax revenue – money made from the sales of goods and services within its borders – state officials warn that the numbers could turn sour without the passage of a federal COVID-relief package.
President Donald Trump and his administration have gone back and forth with Democrats in Congress, saying that a deal could not be reached before the Nov. 3 presidential election date on extending the federal stimulus, known as the Coronavirus, Aid, Relief and Economic Security Act. And the weeks, or months, of uncertainty could force belt-tightening across the board, as COVID-19 restrictions in states like New Jersey drag on indefinitely.
Thursday afternoon data from the New Jersey Treasury show the state took in $848.4 million in September from the sales tax, a 1.3% bump from last year. In August, the state took in $891 million from the sales tax, a 2.9% bump from the prior year.
“Due to the one-month lag in Sales Tax collections, September revenue reflects consumer activity in August,” the state treasury – headed by New Jersey Treasurer Elizabeth Maher Muoio – noted in its Thursday afternoon report.
As the federal stimulus effects fade, sales tax growth is also expected to weaken.
Between March and the end of July, $1,200 stimulus checks, federal Paycheck Protection loans, and the $600 of weekly unemployment benefits from the CARES Act pumped an estimated $34 billion into the state economy, according to the state treasury.
“As the federal stimulus effects fade, sales tax growth is also expected to weaken,” the treasury cautioned.
Beginning in mid-March, Gov. Phil Murphy enacted a sweeping set of business closures meant to clamp down on the number of public spaces where people might gather and, as a result, risk exposure to COVID-19. That saw the indefinite shuttering of non-essential retail, malls, casinos, theaters, sit-down dining, gyms, nail and hair salons, many forms of construction, elective surgeries, and indoor amusement places. Those restrictions only gradually began being lifted starting in mid-June.
What followed, as a result of the mass shutdowns, has been the worst economic recession since the Great Depression with record-high unemployment and 1.5 million New Jerseyans out of work.
Sales tax collections for April, which reflected March consumer spending, dropped nearly 14% from $906 million in 2019 to $782 million in 2020. Then in May, which reflected the numbers from April, the sales tax dropped 20% from the year prior—from $766 million in 2019 to $544 million in 2020.
“Folks are desperate. Something has to get done. We’ve got to stop playing politics with this and get this done,” Murphy said at a Thursday morning appearance on CNBC’s segment “Squawk Box.”