Despite ever-mounting inflation and the omicron variant in December – and the potential for a slump in state tax collections this spring – New Jersey’s sales tax dollars and other cash flows surged over the past two months amid the holiday shopping season, according to the latest state figures.
New Jersey reaped in over $972 million in sales tax in December—an 11.2%, or nearly $100 million, increase from December 2020 and its strict COVID-19 shutdowns, according to figures from the New Jersey Treasury Department.
In January, the state enjoyed $1.34 billion from sales tax, a 16.1% – or $187 million – increase from January 2021, according to numbers released Feb. 14.
But sales tax numbers come with a one-month lag, the state Treasury points out, so figures released for January reflect December collections, and figures released for December reflect November collections, and so on.
New Jersey’s main sources of cash are the gross income tax and the corporate business tax, which each account for billions of dollars in state revenue.
The Garden State notoriously has some of the highest taxes in the U.S., including the “millionaire’s tax” on income above $1 million, a top corporate tax rate of 11.5%, and among the nation’s steepest property taxes.
Whether the state’s fortunes in the sales tax and other main cash flows can continue is another matter, though, as Treasury officials warned in the Monday statement of an “uncertain spring” in terms of financial prospects.
All told, the state saw $4.7 billion in tax collections last month for a total $621 million, or 15.2%, increase year over year.
Between July last year – the start of the New Jersey’s new budget – and this January, the state raked in $22.8 billion compared to $18.7 billion – a 21.7% increase – during that same period from 2020 to 2021.
Those collections have allowed for massive spending increases, while New Jersey’s budget clocked in at a record-high $46.4 billion.
Wall Street analysts and critics of the state budget process cautioned that the state will need to come up with the funds to support those continued spending increases, lest their having to cut spending or raise taxes—something Gov. Phil Murphy has promised to avoid in his second term.
Income tax collections are expected to “slow noticeably in the spring,” due to a work-around the state enacted so that New Jerseyans could avoid some financial pains from the $10,000 federal cap on state and local property tax deductions.
Meanwhile, several tax cuts Murphy approved last year will also eat into how much the state collects. That includes the expansion of the earn income, and the child and dependent care tax credits.
At $44 billion, New Jersey’s debt load is one of the highest in the nation. On top of that, the state’s public worker pensions are unfunded by about $100 billion, according to some estimates, and were the source of a combined 11 credit downgrades between 2010 and 2018, when former Gov. Chris Christie was in office.
Murphy is slated to release a new budget address on March 8, after lawmakers granted him a two-week extension to continue riding out the omicron variant, and so that the address can be presented in person for the first time in two years.
Republican lawmakers questioned the governor’s motive for the two-week extension, saying they were skeptical of the omicron explanation.
“Every time this legislative body comes to a crossroads, where you can chose between transparency, good government, open public input, lengthy discussion and debate with the intent of getting to the best possible solution the first time, or opaqueness, backroom deals, and a rushed legislative process, you always make the wrong choice,” reads a Jan. 14 statement from Assemblyman Brian Bergen, R-25th District.l