Treasury: February Revenue Collections Up 10.8 Percent Ahead of Impending Slowdown in Growth

(TRENTON) — The Department of the Treasury reported that February revenue collections for the major taxes totaled $3.038 billion, up $294.9 million, or 10.8 percent above last February. Fiscal year-to-date, total collections of $25.850 billion are up $4.357 billion, or 20.3 percent above the same eight months last year.

Strong year-to-date collections growth for Fiscal Year 2022 (FY2022) is reflected in the recently revised year-end growth targets released on March 8 with the Governor’s FY2023 Budget Message. The total FY2022 revenue forecast increased by $4.618 billion from the level certified when the Appropriations Act was enacted in June. Substantial additional federal stimulus enacted last year, strong consumer demand, growing wages, and the improving COVID-19 outlook have steadily strengthened economic activity and improved tax collections.

February collections for the Gross Income Tax (GIT), which is dedicated to the Property Tax Relief Fund, totaled $1.439 billion, up $157.5 million, or 12.3 percent above last February.  Fiscal year-to-date collections of $10.799 billion are up $1.517 billion, or 16.3 percent. Overall GIT growth in the first eight months of FY2022 has been spurred primarily by strong employee withholding collections, which are recovering from weaker levels during the pandemic.  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 noted that GIT growth in the second half of FY 2022 is expected to slow noticeably in the spring due to the substantial increase in Pass-Through Business Alternative Income Tax (PTBAIT) credit claims that are due, as well as the impact from a number of new or expanded tax relief programs enacted with this year’s budget, 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.

Taking all of this into account, the revised year-end GIT forecast released this week of $17.370 billion is up $489.0 million from the Appropriations Act, while the PTBAIT forecast of $3.1 billion is up $1.730 billion.

The Sales and Use Tax, the largest General Fund revenue source, reported $845.0 million for February, an increase of $81.4 million, or 10.7 percent. Fiscal year-to-date collections of $7.181 billion are up $801.3 million, or 12.6 percent higher than the same period last year. The strong February collections reflect January sales activity, as receipts are reported with a one month delay. Some moderation in Sales Tax growth is expected in future months, as the consumer boost from last year’s federal stimulus payments fades. The revised year-end forecast of $12.140 billion is up $789.6 million from the Appropriations Act.

The Corporation Business Tax (CBT), which is the second largest General Fund revenue source, reported collections of $89.3 million in February, an increase of $0.7 million, or 0.8 percent, over last February. Fiscal year-to-date, CBT collections of $2.646 billion are up $586.0 million, or 28.4 percent above the same period last year. Estimated payments and partnership payments have driven CBT growth so far this fiscal year, as corporate profits rose and as data showed the PTBAIT credits would almost entirely impact the GIT rather than the CBT. The revised year-end forecast of $5.180 billion is up $1.216 billion from the Appropriations Act.