GSI analysis of N.J.’s revenue report: Economy is lagging

New Jersey’s state tax revenues for December were released this week, and according to a Garden State Initiative analysis, the economy is lagging.

“While the governor is offering his State of the State address today, there can be no mistake that the state of our economy is tenuous as reflected in weak state tax revenue,” said Garden State Initiative President Regina M. Egea. “The underpinnings of our state economy, with high taxes and heavy debt, leave us ill-prepared for an inevitable economic cycle slowdown.”

The Department of Treasury reported that December revenue collections for the major taxes totaled $2.97 billion, down $335 million, or 10.1 percent, when compared to last December. However, year-to-date total collections of $12.9 billion are up $269 million for the fiscal year 2019, 2.1 percent more than the same period last year.

The following is a comparison of December 2018 to December 2017 — and fiscal year 2019 to 2019 — collections for sales and income taxes:

  • The state sales tax was up 5.4 percent ($40 million) from December 2018 to December 2017;
  • Fiscal year 2019 sales tax revenue was up 1.2 percent ($46 million) compared to a 6.2 percent increase in the Treasurer’s annual projection;
  • The state’s Gross Income Tax revenue was down 35.2 percent (-$640 million) from December 2018 to December 2017.
  • Fiscal year 2019 GIT was down 6.5 percent (-$393 million) compared with the planned annual 5.4 percent increase.

According to Elizabeth Maher Muoio, New Jersey’s treasurer, the decline in December’s state income tax revenue was due to federal tax deadline changes and the encouragement for many to file taxes earlier in December 2017 to take advantage of state and local tax deduction caps that kicked in January 2018.

GSI said one of the biggest tax revenue growth areas has been due to the jump in Corporate Business Tax rates that were included in the budget which passed last summer. The CBT brought in $596.1 million in revenue, 40.9 percent above last December.

Although the CBT hike provided short term tax revenue growth, GSI said “it has also damaged the state’s already rocky competitive standing” in terms of where businesses are looking to locate.