Treasury: December Revenue Collections Dip as Federal Tax Law Changes Impact the Timing of Certain Payments
(TRENTON) – The Department of the Treasury reported that December revenue collections for the major taxes totaled $2.973 billion, down $335 million, or 10.1 percent below last December. However, year-to-date, total collections of $12.901 billion are up $269 million for FY 2019, 2.1 percent above the same period last year.
The dip in overall December collections is due primarily to a drop in Gross Income Tax (GIT) receipts, which are constitutionally dedicated to the Property Tax Relief Fund. GIT receipts were down 35.2 percent from last December with $1.182 billion collected while year-to-date collections were down 6.5 percent with $5.667 billion collected. This dip is attributed to federal tax law changes that created a shift in tax planning behavior, a pattern that is being reported in a number of states.
Last December’s GIT collections, which rose by 30.5 percent, were enhanced by certain one-time hedge fund payments made because of a federal tax deadline, as well as accelerated tax payments made in December 2017 in order to avoid the new federal cap on the State and Local Tax (SALT) deduction, which took effect in January 2018. Additionally, the capped federal SALT deduction may have prompted a change in tax planning behavior this year because it eliminated the incentive to prepay the estimated fourth quarter payment in December, which is due January 15. While this last factor may have reduced December GIT receipts, it also may increase January receipts.
The Sales and Use Tax, the largest General Fund revenue source, reported $788.1 million in December, up 5.4 percent. Year-to-date, sales tax collections of $3.982 billion are up 1.2 percent from the same period last year. The second step of the sales tax rate reduction that began on January 1, 2018 will continue to impact collections for one more month, through the January revenue report. If not for the rate reduction, underlying growth in the sales tax through December would be 5.0 percent.
The Corporation Business Tax (CBT), the second largest General Fund revenue, brought in $596.1 million, 40.9 percent above last December. Year-to-date, the CBT has collected $1.536 billion, or 60.8 percent above last year. The CBT for banks and financial institutions is up 247.8 percent so far in FY 2019 spurred in part by strong bank profits. In FY 2019, corporate tax revenues are expected to grow significantly due to substantial state and federal tax policy changes that influence the tax base and the timing of certain payments.
Casino Revenues of $119.0 million are running 20.3 percent ahead of last year through the end of December. Sports betting has contributed $4.6 million to the Casino Revenue Fund and another $3.1 million to the General Fund through November.
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