(TRENTON) - The Department of the Treasury reported that February revenue collections for the major taxes totaled $2.334 billion, up $191 million, or 8.9 percent above last February. Fiscal year-to-date, total collections of $19.277 billion are up $685 million, or 3.7 percent above the same period last year.
With the release of the Governor’s FY2020 Budget Message on March 5, Treasury issued revised revenue forecasts for FY2019. Overall, total budgeted revenue estimates for the current fiscal year were increased by $327.3 million, a rise of 0.9 percent from the total certified in July at the adoption of the Appropriations Act.
Gross Income Tax (GIT) receipts of $1.064 billion, which are constitutionally dedicated to the Property Tax Relief Fund, are up 2.4 percent compared to last February. Year-to-date collections of $8.938 billion are down 5.1 percent, or $478 million. As a result, the GIT forecast for FY19 was revised downward in the Governor’s Budget Message by $415.1 million.
The two-month dip in GIT collections during December and January - a pattern reported in a number of states - has ended, lending further support to Treasury’s belief that tax law changes under the federal Tax Cut and Jobs Act (December 2017) induced a significant shift in tax planning behavior.
Historically, high-income taxpayers had an incentive to accelerate substantial tax payments into December each year to take advantage of the unlimited federal State and Local Tax (SALT) deduction, the value of which could equal six figures for certain taxpayers. As a result, between 50 percent and 60 percent of total December and January estimated payments were typically prepaid around December 31 for federal tax planning purposes.
In December of 2017 this prepayment behavior jumped to 72 percent as taxpayers attempted to take advantage of the unlimited SALT deduction one last time before it expired. With the federal SALT deduction now capped at $10,000, the incentive to accelerate state tax payments has evaporated and prepayments have plummeted to about 19 percent, a drop of nearly $900 million in one year. Accordingly, it is believed taxpayers are likely now waiting until April to fully reconcile their annual tax liabilities.
The Sales and Use Tax, the largest General Fund revenue source, reported $671.2 million in February, up 2.5 percent. Year-to-date, Sales Tax collections of $5.788 billion are up 3.1 percent from the same period last year. The second step of the Sales Tax rate reduction that began on January 1, 2018 is now complete. Adjusting for the rate reduction and one-time collections taken in through tax amnesty, underlying growth in the Sales Tax through February is 4.6 percent. As a result, the Sales Tax forecast for FY2019 was revised slightly downward in the Governor’s Budget Message by $78.6 million.
The Corporation Business Tax (CBT), the second largest General Fund revenue source, generated $63.0 million in February, 179.3 percent above last year. Year-to-date, the CBT has collected $1.873 billion, or 95.6 percent above last year. The CBT for banks and financial institutions is up 263.2 percent so far in FY2019, spurred in part by strong bank profits. In FY2019, corporate tax revenues are expected to grow significantly due to substantial state and federal tax policy changes that influence tax rates, the tax base, and the timing of certain payments. As a result, the FY2019 CBT projection has been revised significantly upward in the Governor’s Budget Message by $662.4 million, and the CBT for banks and financial institutions has been revised upward by $125.9 million.
Casino Revenues of $162.6 million are running 21.2 percent ahead of last year through the end of February. Sports betting has contributed $6.9 million to the Casino Revenue Fund and another $5.5 million to the General Fund through February.
The Treasurer will address State revenue projections in more detail when she testifies before the Legislative Budget Committees in early April.
February 2019 Revenue Report