Recent tax payments in New Jersey, which had been delayed due to the coronavirus pandemic, have helped to make up some of the financial ground lost because of the health crisis.
The latest revenue report, released Thursday by the Department of Treasury indicates total monthly tax collections for July were up 120% compared to the previous year, reflecting a big boost from final payments that came in last month instead of their original due date in April. The state had moved the tax deadline from April 15 to July 15.
Treasury’s latest revenue report also indicates 13-month state tax collections through the end of July totaled $34.9 billion. That was just shy of the $35.1 billion collected during the 13-month period ending in July 2019, according to Treasury.
The state’s revenue figures are being closely monitored this year as almost never in recent memory, with Gov. Phil Murphy and lawmakers having reset spending projections — and even the duration of the state’s fiscal year — in response to the pandemic and the impact it has had on the economy and tax collections.
Things looked good before the pandemic
State tax collections had been running ahead of last year’s pace before the pandemic struck, and Treasury officials had upgraded forecasts in late February.
But the revenue outlook deteriorated markedly in April after the state delayed its collection of income and corporate-business tax payments to help residents and businesses manage the economic disruption of the pandemic.
In all, a year-over-year decrease in revenues of 60% was measured in April as several other tax sources were also impacted by the pandemic. For example, the sales tax was off year-over-year by nearly 14% in April, according to Treasury’s data.
Total monthly revenue declines continued in May and June, with monthly collections off pace compared to the previous year by more than 13% and 14%, respectively.
Treasury officials had expected a year-over-year increase in July collections as taxpayers adapted to the delayed payment deadlines. In the end, the changed deadline helped to push monthly collections for income tax to $3.36 billion, well above the less than $1 billion that came in during July 2019. Total tax collections for July 2020 were $5.14 billion.
It’s unclear, however, exactly what portion of the July income-tax haul can be attributed to the delayed tax deadline. But Treasury officials pointed out that the total monthly collections for the income tax still fell short of a $3.6 billion monthly target that was set several months ago after Treasury revised its revenue forecasts because of the pandemic.
Lower than expected
“However, lower-than-expected final and estimated payments by individuals were partially offset by improved employer withholding receipts,” Treasury officials said in a statement attached to their official report on July revenues.
The July report also offered signs of hope after the state has lifted some, but not all, of the economic restrictions ordered by Murphy in response to the pandemic.
Sales-tax collections were down by just 3.6% year-over-year in July, a marked improvement from the nearly 15% year-over-year drop in June. Moreover, there is a lag in sales-tax collections, with economic activity from the prior month usually reflected in the monthly reports from Treasury. That suggests the sales-tax figures could improve further in coming months if more economic restrictions are lifted and the pace of new infections remains stable or declines.
To accommodate the delayed tax-payment deadlines, Murphy and lawmakers agreed earlier this year to extend the closeout of the state’s typical, 12-month fiscal year, from June 30 to Sept. 30. They also enacted a three-month, stopgap spending bill to cover state operations during July, August and September. Despite being balanced on paper, the stopgap budget deferred more than $2 billion in planned spending.
The governor is due to unveil a budget plan on Aug. 25 that will cover spending needs between Oct. 1 and June 30, 2021. But it’s unclear whether Murphy will propose using any money from new borrowing as part of that to fill projected gaps caused by revenue losses linked to the pandemic.
Murphy and fellow Democrats, who control both houses of the Legislature, last month enacted a new law over the objections of Republicans that allows the state to borrow money to offset pandemic-related revenue losses, which are predicted to continue through at least the middle of next year.
The borrowing law, which allows for up to $9.9 billion in new debt to be issued, was upheld as constitutional in a unanimous opinion issued by the New Jersey Supreme Court earlier this week after the state GOP and other Republicans sued to block it from being implemented.