New Jersey’s monthly sales-tax collections are back in the black after months of being battered by the ongoing coronavirus pandemic.
The state Department of Treasury’s tax-collection report for August 2020 indicates monthly revenues from the sales tax ticked up by nearly 3% compared to the same month last year.
The increase in year-over-year monthly sales-tax collections is the first since February, which was just before the first COVID-19 infection in New Jersey was recorded, according to Treasury officials.
The small uptick could be a promising sign for the state’s finances since the sales tax is the second-largest source of revenue for the state budget. It also comes as Gov. Phil Murphy’s administration has been projecting sharp overall revenue declines amid the pandemic.
But Treasury officials offered some words of caution in a statement issued along with the new tax-collection data released on Wednesday. They noted the August sales-tax figures represent economic activity that occurred primarily in July — when enhanced unemployment checks were still being funded by the federal government — since sales-tax revenues aren’t immediately remitted to the state.
Overall tax take was down
Moreover, the total revenue the state collected from all major tax sources in August was off last year’s monthly pace by nearly 6%, according to Treasury’s report.
This year, the monthly revenue figures are being monitored more closely as Murphy and lawmakers have had to reset spending projections, and even realign the state’s fiscal year, in response to the pandemic and revenue losses it has triggered.
Revenues have also emerged as a key issue for the governor and fellow Democrats who control the Legislature with only two weeks to go before a new budget must be enacted to cover spending between Oct. 1 and June 30, 2021. Murphy is asking lawmakers to approve $1 billion in new or increased taxes, and to allow another $4 billion to be raised from new borrowing, as part of a broader plan to increase year-over-year spending amid the projected revenue losses.
Last week, fiscal experts from the nonpartisan Office of Legislative Services released a long-range revenue forecast that was nearly $1.4 billion higher than Murphy administration estimates that were released in late August. How the two projections are reconciled over the next two weeks remains to be seen. But as they draft a spending bill, lawmakers may prefer to use the forecast compiled by their own fiscal experts since it could justify less borrowing or tax increases.
State tax collections had been running ahead of last year’s pace before the pandemic struck, and Treasury officials had upgraded revenue forecasts as late as February.
What next without federal stimulus?
But the outlook deteriorated markedly starting in April as much of the state was shut down to try to slow the rate of new COVID-19 infections.
The sales tax has been a particular source of concern, with monthly collections falling off pace in May by nearly 30% compared to the same month last year. Year-over-year monthly losses continued into June and July before the August report indicated an uptick of 2.9% compared to last August.
It’s too soon to know whether the new figures are a sign of improving consumer confidence as the rate of new infections has slowed in New Jersey, or a reflection of the billions of dollars in federal funding that were pumped into the state economy in recent months, including through stimulus payments, business loans and enhanced federal unemployment benefits.
Treasury officials on Wednesday highlighted the significant spending that occurred earlier this year as part of the federal government’s broader pandemic-relief and stimulus efforts.
“With all of that support now ended, the stimulus effects are expected to fade,” the officials said.
They also pointed to the importance of the next monthly revenue report, which will reflect the latest quarterly estimated payments that will be submitted by taxpayers for the income tax — the state’s largest source of revenue — and the corporate-business tax, which is another important revenue source for the budget.