New Jersey’s monthly revenue collections were off pace again in May as economic activity across the state slowed in response to the ongoing pandemic.
New monthly tax collection figures released Friday by the state Department of Treasury indicated a year-over-year decline of over 13%, marking the second straight month where revenues for the current fiscal year fell short of a monthly collection total from last year.
But amid that disappointing trend were some potential glimmers of hope.
They include May income tax collections that nearly matched last year’s total for the month, even as many in New Jersey have lost their jobs during the pandemic. Year-to-date state sales-tax collections were also only slightly off last year’s pace despite the ongoing economic slowdown.
In addition, Treasury has yet to collect last year’s state income tax payments after Gov. Phil Murphy and lawmakers decided earlier this year to push back the typical April 15 filing deadline to July 15. That means some share of the remaining revenue drop-off could be made up in a few months once those payments come in.
“Just how much remains to be seen as it is likely more taxpayers than usual will request extensions,” Treasury said in a statement Friday.
State tax collections through the first three quarters of fiscal year 2020 had been running ahead of the prior year’s pace up until April, when things took a dramatic turn in the other direction, as Treasury had been warning would be the case.
Also, some important sources of tax revenue are sent to the state with a lag, including the sales tax, and officials had cautioned it would take until the May revenues were tabulated to see a fuller view of the pandemic’s impact on state tax collections.
Not surprisingly, the sales tax was one of the worst-performing revenue sources in May, falling nearly 30% off the pace set during May 2019, according to this latest monthly report. However, for the first 11 months of fiscal 2020, sales-tax collections were behind last year’s pace for the same period by just 0.3%.
Treasury’s statement suggested the stimulus payments from the federal government through the Coronavirus Aid, Relief, and Economic Security (CARES) Act may be influencing state sales-tax collections to some degree.
“These payments peaked in April and were largely complete by the end of May, suggesting that the stimulus effect will fade in subsequent months without additional federal assistance,” the statement said.
In all, fiscal year 2020 tax collections were about $2.5 billion, or 8.5%, off of last year’s pace for the same 11-month period during the prior fiscal year.
But the lower year-to-date total reflects the decision to push back the deadline for collecting income-tax and corporate-business tax payments from April to July. The income tax is the state’s largest single source of revenue, and April payments can easily total several billion dollars.
Last month, Treasury announced April revenue collections were off by nearly 60% year-over-year, reflecting both the impact of the pandemic and the decision to delay the collection of major tax payments.
The income-tax figures included in Treasury’s May revenue report offered some reason for hope as the monthly year-over-year collections were off pace by only 0.5%, suggesting stronger than expected withholdings.
Last month, Murphy’s administration revised its spending and revenue forecasts for the current fiscal year for the second time since a $38.7 billion fiscal 2020 spending bill was enacted around this time last year. As part of that May 22 update, Treasury predicted roughly $36.7 billion in tax revenue would now be collected by the end of this month.
Meanwhile, nonpartisan experts from the Office of Legislature Services released last month a slightly more optimistic revenue projection of $37.1 billion over the same period.