October Tax Collections Up with Indication of Possible Slowdown
New Jersey reports that October revenue collections remain solid and on the rise with some indications of a slowdown in the coming months.
The NJ Department of the Treasury reported that October revenue collections for the major taxes totaled $2.973 billion, up $202.4 million or 7.3 percent above last October. Year-to-date, total collections of $11.370 billion are up $1.237 billion, or +12.2 percent over the same four months last fiscal year.
October collections for the Gross Income Tax (GIT), which are dedicated to the Property Tax Relief Fund, totaled $1.299 billion, up $135.2 million or +11.6 percent above last October.
This month's increase can be attributed to two separate factors: employer withholding continued showing solid growth, and revenues also performed well during the fall taxpayer filing extension period, driven by final Tax Year 2021 payments.
However, refunds were also up significantly, in part due to several large refunds from taxpayers claiming Pass-Through Business Alternative Income Tax (PTBAIT) credits. Fiscal year-to-date collections of $4.674 billion are up $442.9 million, or +10.5 percent.
The Sales and Use Tax, the largest General Fund revenue source, totaled $1.265 billion, an increase of $64.8 million or +5.4 percent above last October. Due to a one-month lag in the reporting and payment of Sales Tax, October revenue reflects consumer activity in September. This month's 5.4 percent growth lagged behind regional inflation rates, as shown by NY-NJ-PA growth in the Consumer Price Index of 6.2 percent. This is only the second time in two years that real Sales and Use Tax growth declined in NJ.
October collections also reflect the partial impact of the State's Back-To-School Sales Tax Holiday, which occurred from August 27 through September 5, although precise data on the impact of the tax holiday are not available. Fiscal year-to-date collections of $3.370 billion are up $263.0 million, or +8.5 percent.
The Corporation Business Tax (CBT), the second largest General Fund revenue source, totaled $112.8 million in October, a decrease of $28.9 million, or -20.4 percent below last October. October collections are typically among the smaller CBT months each year. Fiscal year-to-date collections of $1.450 billion are up $73.6 million, or +5.3 percent.
PTBAIT revenues totaled $9.5 million in October, an increase of $107.8 million from last October's net negative collections balance, mostly due to the timing of refunds. The majority of refunds associated with extended returns were issued in October last year, but this year the majority of these refunds are anticipated to be issued in November. This will likely result in a large net negative collections balance for November rather than October.
Petroleum Products Gross Receipts Tax (PPGRT)
revenues of $122.8 million were $28.1 million, or -18.6 percent lower than a year ago because of the 8.3 cent decrease in the PPGRT rate, which affected collections beginning in November 2021. Of further note, the PPGRT rate decreased by an additional 1 cent effective October 1, 2022. Payments received from November 2022 onward will reflect this rate decrease.
Realty Transfer Fee revenues of $50.8 million were $11.5 million or -18.5 percent below last year. It appears that monthly collections are beginning to reflect the challenging housing market conditions.
Median home prices have begun to decelerate, while monthly closed home unit sales have continued declining as measured on a year-over-year basis. Fiscal year-to-date collections of $174.3 million are essentially flat with the same period last year.
Revenue collection growth to date continues to be encouraging. However, the October data may indicate that the expected moderation in collections growth has begun and could continue through the rest of FY2023, particularly during the spring tax filing season when last year's historically high collection levels are unlikely to be repeated.
Please see the attached chart for monthly and yearly revenue collection comparisons.