Credit: (AP Photo/Charles Krupa)New Jersey’s overall tax receipts were running ahead of last year’s totals through the first quarter of the current fiscal year, despite concerns about rising unemployment and sluggish business-tax revenues.
State income tax collections helped lead the way over the first three months of the fiscal year, according to the latest monthly revenue report issued by the state Department of the Treasury.
Year-over-year collections from the state income tax were up nearly 13% through the end of September, Treasury officials said.
The income tax is the largest single source of revenue for the state budget, generating more than $21 billion annually in dedicated funding for things like K-12 public education and direct property-tax relief.
Meanwhile, sales-tax collections were also running ahead of last year’s pace through the end of September by about 3%, according to Treasury.
The sales tax is the largest source of revenue for the state budget’s general fund, producing more than $14 billion to help cover many of state government’s key programs and services.
The increase in overall tax collections tracked by Treasury over the first quarter of the state’s July-to-June fiscal year measured largely in line with a roughly 3% rate of growth in revenue that was baked into a nearly $60 billion annual budget enacted by Gov. Phil Murphy and lawmakers at the end of June.
However, total state expenditures are projected to outpace revenue collections by nearly $1.5 billion through end of June, even with the estimated 3.3% growth in revenues the Murphy administration has forecasted for the 2026 fiscal year, according to state budget documents.
Murphy and fellow Democrats who control both houses of the Legislature agreed to spend down general budget reserves and divert funding from the state’s dedicated debt-relief reserve as part of their efforts to offset that nearly $1.5 billion structural budget gap.
September is an important month on the state’s revenue calendar because it includes several dates for estimated payments, including the gross income tax and the corporation business tax.
This year, overall state tax receipts totaled about $5.1 billion during September, up roughly $219 million, or 4.4%, above the total for the same month last year, according to Treasury.
The income tax was up by more than 18% over last September, despite a recent uptick in the state unemployment rate.
Treasury officials attributed the year-over-year increase in income-tax revenue recorded during the month of September to “strong collections from employer withholding and estimated payments,” while adding refunds were below last year’s totals for the month.
However, corporation-business tax collections continue to be an early area of concern amid significant federal policy changes, including the ongoing foreign trade war instigated by President Donald Trump.
For the month of September, the corporation-business tax, or CBT, was off last year’s pace by nearly 30%, according to Treasury.
And over the first quarter of the current fiscal year, CBT collections fell behind last year’s pace by nearly 35%, something Treasury officials said was driven by “an increase in refunds related to tax periods prior to 2022, and a sharp drop in estimated payments in September.”
By the time the current fiscal year closes on June 30, total CBT collections are projected to grow, by nearly 3% year over year, according to state budget documents.
State business leaders have urged policymakers to pay close attention to the early weakness in the business-tax collections, and to prioritize initiatives that would stimulate business growth to help prevent further declines.
On the positive side of the ledger, casino revenues were up by more than 40% through the first quarter of the fiscal year amid the growing popularity of online gambling and mobile sports betting, according to Treasury.
But this year, casino-tax collections are also being influenced by tax hikes on online gambling and mobile sports betting that were enacted by Murphy and lawmakers to help support the annual budget adopted in late June.
Meanwhile, realty transfer fee collections were also up over the first quarter of the fiscal year, by more than 16%, according to Treasury.
“The growth in realty collections has been helped along by elevated home prices as of late, given recent declines in unit sales,” Treasury officials said.
