Credit: (AP Photo/Matt Rourke)Despite concerns about a slowing national economy, state tax receipts ticked up in July, according to the first revenue report issued for the fiscal year that began last month.
The tax-collection data released Wednesday by the state Department of the Treasury also indicates receipts grew in New Jersey on a yearly basis through the end of July, albeit at a very modest rate.
However, despite the overall revenue picture appearing positive at the onset of this new fiscal year, not every tax source is seeing growth, according to the report.
Among those revenue sources that reported a loss was the closely watched realty transfer tax, which recorded declines on both a monthly and yearly basis.
In all, state tax collections grew by nearly $100 million over the 13-month period that closed at the end of July, according to Treasury, which was largely in line with expectations.
Treasury officials track growth over a 13-month time frame in July because cash collections during the month can include revenues attributed to both fiscal year 2024, which ended June 30, and fiscal year 2025, which began July 1.
Revenues from income tax lead the way
Leading the way this July was the income tax, with overall receipts up by more than $250 million over the 13-month period, according to the report.
The income tax is the largest single source of revenue for the annual budget, with proceeds constitutionally dedicated to funding items that include K-12 public-school aid and direct property-tax relief programs like Anchor.
Revenues from the realty transfer tax are likely to be closely watched this fiscal year as concerns are running high about the potential for an economic slowdown, or even a possible recession, developing by early next year.
Income tax collections during the month of July beat the totals from July in fiscal year 2024 by more than $300 million, or nearly 30%, but Treasury officials said this July’s monthly totals were distorted by an extra withholding payment occurring last month.
Still, amid concerns about a slowing labor market, Treasury officials said state income-tax collections after accounting for the extra withholding payment were up for the month by $110 million, or about 9%, compared to the same month last year.
Sales-tax collections up a smidgen
Meanwhile, sales-tax collections were running slightly ahead of last year’s pace for the 13-month period through the end of July. The sales tax is the largest source of revenue for the budget’s general fund.
Collections from the corporation business tax, which is the second-largest source of revenue for the general fund, were also up, by nearly $11 million, or about 5%, during July.
However, July realty transfer tax revenues came in 18.5% lower than the same month last year, following two straight months of growth, the officials said.
Revenues from the realty transfer tax are likely to be closely watched this fiscal year as concerns are running high about the potential for a nationwide economic slowdown, or even a possible recession, developing by early next year.
Those concerns come as economists wait to see whether the Federal Reserve will decide to lower interest rates after the rate of annual inflation dipped below 3% last month for the first time since 2021. That came after the national unemployment rate rose to 4.3% in July, up from 4.1% recorded the previous month.
Democrats bank on revenue growth
In New Jersey, Gov. Phil Murphy and fellow Democrats who control both houses of the Legislature are banking on modest annual revenue growth during the 2025 fiscal year to help support a record-high $56.7 billion annual budget that Murphy signed into law in late June.
But even with that expected growth, Murphy and legislative leaders baked into their annual budget a more than $2 billion structural gap between projected revenues and expenditures, something Murphy said was done deliberately as part of efforts to jump-start the state’s post-COVID-19 economy.
To help bridge the gap, an opening surplus of $8.25 billion will be reduced to $6.125 billion by the end of the 2025 fiscal year, according to an updated budget sheet obtained by NJ Spotlight News through an open public records law request.
However, if revenues fail to live up to expectations during the 2025 fiscal year, which closes June 30, Murphy and lawmakers could be forced to draw down more of the surplus, or enact a series of mid-year spending cuts, because unlike the federal government, the state is generally prohibited by the state Constitution from running up a deficit.
