NJ tax revenues plunge, will you pay more?
👎 NJ tax revenues are plunging
❓ What is causing the decline?
❓ Will NJ have to raise taxes to cover the shortfall?
New Jersey state tax revenues plunged nearly 20% in May when compared to last year.
According to figures released by the New Jersey Department of the Treasury, revenue collections were off fell $641.8 million last month compared with May 2022.
For the year, New Jersey has seen a revenue decline of more than $1 billion.
Gov. Phil Murphy's administration does not see any improvement soon. "Revenue collections are projected to remain soft through the remainder of the fiscal year," treasury officials said in a news release.
The biggest drop in revenue was seen in sale tax collections, down 2.1%, but the biggest factor impacting revenue was tax refunds.
Tax refunds more than doubled compared to last year, possibly due to more people filing a tax return, but also due to Murphy's ANCHOR Property Tax Relief program.
Revenue drop was expected
Gov. Murphy and State Treasurer Liz Muoio have said they expected revenue to decline $2 billion over the next two years, although they have declined more than projections.
In May, Muoio told lawmakers during a budget hearing "we are well prepared to handle" a drop in revenue collections.
In past years, this would have been calamitous, but the state is sitting on an estimated $10 billion surplus due to federal pandemic relief, increased tax collections last year and Murphy's controversial plan to borrow billions of dollars.
At the same budget hearing, Thomas Koenig, budget and finance officer with the nonpartisan Office of Legislative Services, agreed.
"This is not the cataclysmic event that it would have been 10 or 20 years ago," Koenig said.
Even with tax revenues off more than projected, New Jersey will still retain a surplus of between $7-8 billion.
In recent years, the state surplus has been $1 billion or less, leaving little room to deal with revenue shortages or unanticipated costs.
Is the surplus too much?
Republicans in the legislature have been arguing for months that the surplus belongs to taxpayers and should be returned.
In June, GOP members of the Senate Budget Commitee proposed an additional $6 billion in tax relief.
Key points of their plan included $4.3 billion in direct property tax relief to towns and counties.
The Murphy administration is sitting on billions of dollars of unallocated debt relief funds while towns and counties with substantial needs are being ignored. - Sen. Declan O’Scanlon, R-Monmouth
They also support efforts to prevent businesses from having to pay a massive tax hike to replenish the Unemployment Insurance Fund.
The Republican plan would direct $550 million to offset increased payments into the UI fund, which the New Jersey Business and Industry Association claims will cripple many small businesses in our state.
Gov. Murphy and legislative leaders have promised to address payroll taxes but have yet to take meaningful action to avoid a huge tax increase on business before the new rates take effect in July.
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