Treasury: Tax Changes Pause Downward Revenue Trend for November

TRENTON — The Department of the Treasury reported that November revenue collections for the major taxes totaled $2.261 billion, up $124.7 million, or 5.8 percent above last November. However, fiscal year-to-date, total collections of $10.370 billion are down $548.3 million, or 5.0 percent below the same five months last year.

Although November is historically one of the smaller collection months each year, without any major tax payments due, this November’s collections were buoyed by changes to the Gross Income Tax (GIT) and the Petroleum Products Gross Receipts Tax (PPGRT). Absent these tax changes, those revenues would have declined in November.

November collections for the GIT, which are dedicated to the Property Tax Relief Fund, totaled $962.8 million, up $65.2 million, or 7.3 percent above last November. However, year-to-date, GIT collections of $4.319 billion are down $409.3 million, or 8.7 percent. November’s GIT collections were boosted by the enactment of a 10.75% marginal tax rate on taxable income between $1.0 million and $5.0 million. This change includes a temporary 21.3% withholding rate on high-income earners during the final months of 2020 to partially account for the fact that the extension of the marginal tax rate on millionaires was retroactive to January of this year.  That factor is estimated to have enhanced November’s collections by between $70 million to $100 million, and is likely to have a similar impact in December. Treasury also notes, however, that this temporary, higher withholding rate could result in refunds next year.

The Sales and Use Tax, the largest General Fund revenue source, reported collections of $836.9 million in November, an increase of $43.3 million, or 5.5 percent, which is the fourth consecutive month of growth for this revenue. Due to the one-month lag in the reporting of Sales Tax collections, November revenue reflects October consumer activity. Year-to-date, Sales and Use Tax collections of $3.621 billion are up $147.0 million, or 4.2 percent.

The Corporation Business Tax (CBT), which is the second largest General Fund revenue source, reported $111.9 million in November, up $3.6 million, or 3.3 percent above the same month last year. Refund payments dropped significantly below last November, pushing net CBT collections into slightly positive territory for the month. Year-to-date through November, CBT collections of $1.091 billion are down $160.7 million, or 12.8 percent below the same period last year.

While November saw a pause in the recent decline of state revenue due to tax changes, Treasury still expects overall FY 2021 collections to remain weak into the winter months followed by a return to sustainable collections growth next spring and summer.

Please see the attached chart for monthly and yearly comparisons.