The state’s revenue collections are up in February, amid on overall slump in the state economy and promises by the state treasury that it will make up for those loses come tax season in April.
State revenue collections increased 8.9 percent in February compared to the previous fiscal year, boosted by considerably higher than expected performance of the corporate business tax, the treasury said. That prompted the state to slightly increase how much it expects to have as a surplus by the end of the year to $327 million.
The growth rate is now 3.7 percent, versus the 7.7 percent called for in the 2019 budget, which Gov. Phil Murphy signed last July.
Treasury officials said that tax revenue was falling behind because of taxpayers’ behavior changes following the 2017 federal tax cuts.
“Historically, high-income taxpayers had an incentive to accelerate substantial tax payments into December each year to take advantage of the unlimited federal SALT deduction, the value of which could equal six figures for certain taxpayers,” reads a statement from the state treasury.
“As a result, between 50 percent and 60 percent of total December and January estimated payments were typically prepaid around Dec. 31 for federal tax planning purposes,” the statement adds.
State Treasurer Elizabeth Maher Muoio is scheduled to unveil the actual numbers come April, which will show whether or not the vast majority of New Jersey taxpayers have yet to file and whether New Jersey will meet its targets.
“By law, the governor may apply amounts that are in the operating funds balance (cash reserves) to solve for any revenue shortfall,” said Marcy Block, senior director of public finance at Fitch Ratings, one of the three Wall Street rating analysts.
“The governor may also, without legislative approval, reduce appropriations to solve for any gap. Should revenues fall short of what the state expects in fiscal 2019, we would expect a combination of these two strategies to solve for any gap,” Block added.
Corporation Business Tax (CBT) revenue for the state year-to-date was $1.9 billion, or 95.6 percent higher than last year, which prompted the governor’s office in its budget address earlier this month to project an additional $662 million more that the state will have in its coffers by July, than what the budget called for when Murphy signed it last summer.
As part of the budget agreement, backed by Senate President Stephen Sweeney, D-3rd District, the state would increase its CBT rate by 2.5 percent for two years and 1.5 percent for another two years before sun setting.
“The report is a not very subtle recognition of the weak state of our economy and a climate that is hostile to taxpayers and job creators,” Regina Egea, president of the public policy think tank Garden State Initiative, said Thursday in a statement. “But what should concern lawmakers and the public is this Administration’s doubling-down on the same policies that have our state at this tipping point.”