Warning sign or blip? NJ’s revenues drop way behind forecast
December tax collections contain warning signs that New Jersey’s current budget could have fiscal problems, though the state Department of the Treasury says it’s still too soon to know for sure.
Halfway through fiscal 2019, collections of the state’s major revenues are running 2.1 percent ahead of their pace from one year earlier. The state budget counts on 7.5 percent growth. The state would have needed to collect an additional $680 million to be meeting its year-end growth target.
December was particularly concerning, as tax collections were 10 percent smaller than in December 2017, a drop of $335 million.
The biggest shortfall was in the income tax, which declined 35 percent. But the Treasury Department says that could be because of a change in tax-planning behavior resulting from federal tax law changes adopted a year ago – “a pattern that is bring reported in a number of states,” it said.
- December 2017 income tax collections rose 30 percent, enhanced by one-time payments from hedge funds made because of a federal tax deadline.
- That December’s collections were also boosted when some taxpayers made tax payments earlier than usual to avoid the new federal cap on the state and local tax (SALT) deduction that took effect in January 2018.
- The cap on SALT deductions may have also eliminated the incentive for some taxpayers to prepay the estimated fourth quarter payment, for which the deadline is Tuesday. If that took place, January receipts could be bigger than a year ago.
Sales taxes are up 1.2 percent for the year, while the budget counts on 6.2 percent growth.
Corporate taxes were up 41 percent in January and are up 61 percent so far this year, higher than the 47 percent growth rate budgeted after the tax was hiked in July.
Gas tax collections are running behind expectations. If that persists through late summer, another increase in the gas tax could be instituted and take effect in October.