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(TRENTON) - The Department of the Treasury reported today that April revenue collections for the major taxes totaled $2.345 billion, down an unprecedented $3.5 billion, or 59.7 percent, below last April as the economic impact of the global pandemic begins to take its toll on the State’s finances. Fiscal year-to-date total collections, which had been running ahead of last year through the end of March, are now at $24.743 billion, down $2.2 billion, or 8.1 percent below the same period last year.
Despite this precipitous decline, it is important to note that April revenue collections largely reflect March economic behavior due to the fact that many of the major revenues report with a one-month lag. Because the social and commercial restrictions implemented due to the COVID-19 pandemic were only in place for about half the month of March, the impact of the pandemic on New Jersey’s revenue collections is still not fully apparent. Additionally, April’s collections reflect the impact of extending the filing and payment deadline for both the income tax and the corporation business tax from April 15 to July 15.
The Gross Income Tax (GIT), which is constitutionally dedicated to the Property Tax Relief Fund, is the State’s largest tax revenue source and April collections are typically the largest month of GIT collections each year. However, due to the extension of the filing deadline, GIT receipts of $1.004 billion are 72.3 percent below last April and year-to-date collections of $11.123 billion are down 14.9 percent. While final payments for tax year 2019 plummeted approximately 90 percent in April, Treasury expects a portion of this shortfall to be made up during July, although just how much remains to be seen as it is likely more taxpayers than usual will request extensions.
For tax year 2020, the important first quarter of estimated GIT payments were down 75 percent. It is not clear if this shortfall will be fully made up in July given the severity of the losses in jobs and income. In addition, employer withholding collections were down about seven percent for the comparable number of weeks last year, providing initial indications that rising job losses may impact this significant GIT component in the coming months.
The Sales and Use Tax, the largest General Fund revenue source, reported $782.3 million in April, down 13.7 percent. Year-to-date, Sales Tax collections of $7.530 billion are up 2.7 percent from the same period last year. Because the Sales Tax reports with a one-month lag, the April collections reflect consumer behavior during March, in which the economic contraction impacted the last two weeks of the month. Treasury expects May Sales Tax collections to be weaker than April as consumer activity will have faced a full month of restrictions. By comparison, the worst sales tax months during the Great Recession of 2008-09 saw declines of 14.0 percent (April 2009) and 18.4 percent (June 2009).
The Corporation Business Tax (CBT), the second largest General Fund revenue source, generated $375.3 million, 59.5 percent below last April. Year-to-date, the CBT has collected $2.726 billion, or 12.4 percent below last year. Prior to the onset of the pandemic, Treasury had been warning for several months of declines in CBT collections. April now marks the fifth straight month of declining CBT revenues. As with the GIT, corporate taxpayers were allowed to delay April tax payments until July 15. Both final payments and the quarterly estimated payments were down roughly 60 percent. Treasury expects some of this revenue to be made up in July, but notes that corporations have considerably greater tax planning opportunities compared to individuals and may reduce payments substantially given the current economic conditions.
Nearly all major revenue streams declined in April, as is apparent in the accompanying collections chart. Treasury will deliver updated revenue forecasts as part of the budget report required to be furnished to the Legislature by May 22, per the recently enacted law (A-3918) that extended both the tax filing deadlines and the fiscal year.