Treasury: March Revenue Collections Continue Strong Ahead of Impending Slowdown

(TRENTON) — The Department of the Treasury reported that March revenue collections for the major taxes totaled $3.553 billion, up $732.0 million, or 25.9 percent above last March. Fiscal year-to-date, total collections of $29.404 billion are up $5.089 billion, or 20.9 percent above the same nine months last year.

Treasury noted, however, that March collections are artificially elevated to a certain degree because payments last March were lower due to the extended May income tax filing deadline.

March collections for the Gross Income Tax (GIT), which is dedicated to the Property Tax Relief Fund, totaled $1.188 billion, up $159.3 million, or 15.5 percent above last March.  Fiscal year-to-date collections of $11.986 billion are up $1.677 billion, or 16.3 percent. Overall GIT growth in the first nine months of Fiscal Year 2022 (FY 2022) has been spurred primarily by strong employee withholding collections, as wages recover from weaker levels during the pandemic, and boosted more recently by a strong bonus payment season on Wall Street. Additionally, quarterly estimated tax payments are performing well and refund levels were down substantially in the summer and fall, returning to normal for this time of year after taxpayer filing deadlines were delayed in 2020.

However, Treasury continues to note that GIT growth at the close of FY 2022 is expected to slow noticeably due to the substantial increase in Pass-Through Business Alternative Income Tax (PTBAIT) credit claims that are due.  The impact from a number of new or expanded tax relief programs enacted with this year’s budget will also temper collections growth, including the expanded Earned Income Tax Credit and the Child and Dependent Care Tax Credit, and an increase in the amount of retirement income that can be excluded from taxation.

PTBAIT collections jumped in March as final payments for tax year 2021 came due. Collections of $709.5 million were up $483.1 million, more than triple last March’s level as more taxpayers have become aware of this alternative filing option to help mitigate the impact of the federal cap on the deduction of State and Local Taxes. Fiscal year-to-date, PTBAIT collections totaled $2.836 billion, double last year’s collection of $1.426 billion for the same nine-month period. Over $260.0 million came from some 3,800 new taxpayers who had not previously made any PTBAIT payments. Since PTBAIT is designed to be revenue-neutral over time, credits claimed for these payments should reduce State revenue collections, primarily under the GIT.

The Sales and Use Tax, the largest General Fund revenue source, reported $836.0 million for March, an increase of $124.0 million, or 17.4 percent. Fiscal year-to-date collections of $8.017 billion are up $925.4 million, or 13.0 percent higher than the same period last year. The strong March collections reflect February sales activity, as receipts are reported with a one month delay. Some moderation in Sales Tax growth is expected in future months, as the consumption boost from last year’s federal stimulus payments fades.

The Corporation Business Tax (CBT), which is the second largest General Fund revenue source, reported collections of $365.6 million in March, a decrease of $1.3 million, or 0.4 percent below last March. Fiscal year-to-date, CBT collections of $3.012 billion are up $584.7 million, or 24.1 percent above the same period last year. Estimated payments and partnership payments have driven CBT growth this fiscal year, although refund payments are also rising.

Treasurer Muoio will appear again before the Legislative Budget Committees in mid-May, after the annual tax filing season, to update the State’s revenue outlook for FY 2022 and FY 2023.