New Jersey tax collections in the state’s coffers have begun to drop as the state coasts down from an annual holiday shopping craze and back into the reality of a wintery second wave.
Data released Feb. 16 by the New Jersey Department of the Treasury showed drops in the collections of both corporate business tax and the gross income tax between January 2020 and this past January.
Although state collections from the sales tax surge in January, those numbers are typically reported with a one-month lag. In essence, the January sales tax numbers are a reflection of the tax revenue New Jersey made in December, at the height of the holiday shopping season.
While the COVID-19 pandemic and mass business closures meant to halt the spread of the virus have cratered tax collections and drove up record-high unemployment, the impact on state tax collections has begun to appear more muted than originally feared.
Fearing that impact, Gov. Phil Murphy and legislative leadership initially agreed last spring to extend the budget deadline from June 30 to Sept. 30.
The current budget went into effect on Oct. 1, and next week on Feb. 23 Murphy will present a new outlook on the state’s financial performance through the end of the fiscal year on June 30, as well as a spending plan for the subsequent 12 months.
According to the Feb. 16 data, the state brought in $1.9 billion from the corporate business tax, a 2.2% drop from the $2 billion collected last year. Income tax collections were $7.9 billion in January, a 4.1% drop from the $8.3 billion collected last year.
Sales tax collections this January were $5.6 billion, which was up 4.2% from the $5.4 billion reported in January 2020. Data on January tax collections would not be available until next month’s announcement.
Tax collections from the sale of alcohol were up 21.8% between January 2020 and January 2021, which Treasury officials attributed to a surge in “people consuming alcohol more at home than at bars and restaurants.”
“The alcohol taxes are volume taxes, so more volume generates more tax revenue. Consumers can buy more volume per dollar for home use,” the state Treasury added.
In November, tax collections were buoyed by the implementation of an increased gas tax and the implementation of Gov. Phil Murphy’s long-championed “millionaire’s tax,” which increases the income tax from 8.97% to 10.75% for every dollar earned above $1 million.
But they continued that higher withholding rates mean that most of that money might be paid back from the state.
Meanwhile, a state-level workaround to soften the blow of the federal $10,000 cap on state and local property tax deductions brought in an added $1.3 billion in corporate business tax collections between December 2019 and December 2020.
But Treasury officials cautioned that the way the new law was crafted meant that in the long run, the workaround for businesses would ultimately have no impact on state revenue.