Increases to the Corporation Business Tax enacted last year and record income tax collections for April have put New Jersey’s short-term finances in the black as lawmakers craft a state budget for the coming fiscal year.
Both the Office of Legislative Services and the Treasury Department said today higher-than-expected tax collections will add hundreds of millions of dollars in revenue beyond what was estimated just last month.
While the news is good, NJBIA President and CEO Michele Siekerka noted that the Murphy administration was still seeking a tax increase this year, and that the state’s long-term finances contained huge pension and health benefit liabilities that still need to be addressed.
“The state tax collections announced today are encouraging, but not necessarily surprising considering the strength of the national economy, coupled with a Corporate Business Tax rate increase last year that is now second highest in the nation and is bringing in record receipts for the state,” Siekerka said.
“What is surprising, in light of this windfall, is the continued call for even more taxation as part of the FY 2020 budget proposal,” she added. “Clearly, this additional revenue is more justification to not increase the Gross Income Tax rate on those making over $1 million, as proposed, as it will further hurt our competitiveness in the region.
“The question needs to be asked: If we’re continuing to overtax our residents and businesses during an economic upswing, what will happen during an eventual economic downturn?
“New Jersey still desperately needs structural reforms that comprehensively address underfunded pensions and right-size health benefit costs,” Siekerka said. “We must remember the proposed overall budget is increased by 3.2 percent from the current fiscal year and 11.2 percent from FY 2018. It is important that the state focuses on fiscal responsibility rather than additional spending.”
Testifying in the afternoon before the Senate and Assembly budget committees, State Treasurer Elizabeth Maher Muoio said the total revenue forecast for the fiscal year that comes to a close June 30 has been revised upward by $377 million and there will be back-to-back surplus balances of over a billion dollars for both FY2019 and FY2020. Muoio also announced the Murphy administration will deposit $317 million in the state’s rainy day fund for FY2019.
Earlier, The Office of Legislative Services (OLS) predicted a two-year revenue increase of $533 million to the forecasts for fiscal years 2019, which ends June 30, and 2020.
The OLS revenue estimates included a $420 million increase in estimated income tax collections over what it predicted in April. OLS is now expecting the state to collect almost $16 billion in income taxes ($15.95 million). The month also saw a surge in Corporation Business Taxes ($41.3 million), petroleum products gross receipts ($28.1 million) and the sales tax ($13.6 million).