Treasury: May Revenues Fall 13.5 Percent as Continued Impact of COVID-19 is Felt

(TRENTON) – The Department of the Treasury reported today that May revenue collections for the major taxes totaled $2.120 billion, down $331.2 million, or 13.5 percent, below last May as the economic impact of the global pandemic continues to take its toll on the State’s finances. Fiscal year-to-date, total collections of $26.864 billion are now down $2.498 billion, or 8.5 percent below the same period last year.

The Gross Income Tax (GIT), which is constitutionally dedicated to the Property Tax Relief Fund and is the State’s largest tax revenue source, posted May collections of $680.8 million, 0.5 percent below last May. Year-to-date collections of $11.803 billion are down 14.2 percent. In contrast, GIT revenue collections through the end of March were growing by 7.1 percent, prior to the onset of the pandemic-induced revenue deterioration. Treasury expects a portion of the year-to-date shortfall to be made up during July, when deferred April tax payments are due, although just how much remains to be seen as it is likely more taxpayers than usual will request extensions.

The Sales and Use Tax, the largest General Fund revenue source, reported collections of $544.1 million in May, down a remarkable 29.0 percent below last May. By comparison, the worst Sales Tax month during the Great Recession saw a decline of 18.4 percent in June 2009. Year-to-date, Sales Tax collections of $8.074 billion are down 0.3 percent from the same period last year. Because the Sales Tax reports with a one-month lag, the May collections reflect consumer behavior during April, the first full month of COVID-based restrictions.

Treasury noted that despite the unprecedented Sales Tax revenue decline, collections may have been slightly buoyed by direct federal stimulus payments to individuals. These payments peaked in April and were largely complete by the end of May, suggesting that the stimulus effect will fade in subsequent months without additional federal assistance.

The Corporation Business Tax (CBT), the second largest General Fund revenue, generated $95.0 million, 31.0 percent below last May. Year-to-date, CBT collections of $2.821 billion are 13.2 percent below last year. May was the sixth consecutive month of declining CBT revenues. As with the GIT, Treasury expects some of the CBT revenue decline to be made up in July. However, corporations have considerably greater tax planning opportunities compared to individuals, which might reduce payments substantially given the current economic conditions.

Like many of the major consumer-based taxes, State fuel tax revenues were particularly hard hit this month. Motor Fuels Tax revenues of $15.2 million fell 58.8 percent and Petroleum Products Gross Receipts Tax revenues of $60.9 million dropped by 57.4 percent compared to the same month last year.

Due to the fallout from the COVID pandemic, Treasury reduced the FY 2020 revenue forecast by $2.7 billion, as described in the May 22 report to the Legislature. Consistent with that report, nearly all major revenues of note declined in May for the second consecutive month. The attached collections chart that typically accompanies this monthly update displays State revenue collections through the end of May, and illustrates the reduced revenue forecast by now including both the target growth rates under the prior forecast in the February Governor’s Budget Message (GBM) and the lower growth rates under Treasury’s May Target (TMT) revisions.