Treasury: August Revenues Down 7.4 Percent due Mainly to Large CBT Refunds

(TRENTON) — The Department of the Treasury reported that August revenue collections for the major taxes totaled $2.605 billion, down $207.4 million, or 7.4 percent below last August. The majority of the decline in revenues was driven by significantly lower net CBT collections for the month, due mainly to a large increase in refunds. Fiscal year-to-date, total collections of $3.036 billion are down $258.6 million, or 7.8 percent below the same period last year.

While overall collections have started the fiscal year off lower compared to last year, the first two months of the fiscal year are less significant than most other months. The first meaningful tax revenue collections will occur in September because of the significant quarterly estimated payments that are due under the GIT, CBT, and the Pass-Through Business Alternative Income Tax. Treasury anticipates that FY 2024 collections will decline for much of the first half of the fiscal year, followed by revenue growth during the second half.

August collections for the Gross Income Tax (GIT), which are dedicated to the Property Tax Relief Fund, totaled $1.286 billion, up $8.2 million, or 0.6 percent above last year. Employer withholding collections continued to show strong growth, based on strong wages and a steady job market. Declines in estimated and final payments, and higher refunds, offset most of the revenue increase from withholding. Fiscal year-to-date collections of $1.448 billion are down $55.2 million, or 3.7 percent.

The Sales and Use Tax (SUT), the largest General Fund revenue source, totaled $1.093 billion, an increase of $7.5 million, or 0.7 percent above last August. Due to a one-month lag in the reporting and payment of the Sales Tax, August revenue reflects consumer activity in July. The 0.7 percent SUT growth in August was less than the 3.2 percent CPI inflation rate in July, meaning real (inflation-adjusted) SUT growth was negative for the fourth consecutive month.

The Corporation Business Tax (CBT), the second largest General Fund revenue source, totaled negative $125.4 million for August, a decrease of $179.1 million, or 333.9 percent below last August. The revenue decline was due mainly to a stark increase in refunds, largely from a few corporate taxpayers for tax credit claims and overpayments related to prior return years. Such refund claims can be made at any time of the year as corporations review and revise prior year tax returns. The timing of processing and approval of these refund claims is largely unpredictable, and they can vary significantly in magnitude. All CBT revenue components declined year-over-year in August, led by a reduction in estimated payments. Fiscal year-to-date, CBT collections of $96.3 million are down $127.0 million, or 56.9 percent lower than over the same period last year.

Realty Transfer Fee revenues of $41.4 million were down $19.7 million, or 32.3 percent below last year, as the year-over-year declines in collections continue. Reductions in unit closed sales have been the main driver behind the lower realty collections, as declines in inventories of homes available for sale have continued to accelerate, exerting upward pressure on home prices. Mortgage rates remain at elevated levels.