(TRENTON) – The Department of the Treasury reported that December revenue collections for the major taxes totaled $4.3 billion, up $1.331 billion, or 44.8 percent, above last December. Fiscal year-to-date, total collections of $14.67 billion are up $783.0 million, or 5.6 percent above the same six months last year.
Treasury stressed that December collections were substantially higher than the prior year primarily because of the new Pass-Through Business Alternative Income Tax (PT-BAIT) that the State enacted last January (P.L.2019, c.320). PT-BAIT was established to provide tax relief to New Jersey taxpayers who have been negatively impacted by the cap on the federal deduction for state and local taxes (SALT). The new tax allows pass-through entities to elect to pay tax on proceeds that are distributed to its owners. In return, owners are able to claim a tax credit against their Corporation Business Tax (CBT) or Gross Income Tax (GIT) liability that is equal to their share of the pass-through entity’s tax liability.
In the long run, the tax is expected to be revenue neutral because any taxes paid by the pass-through entity will result in equivalent tax credits for its members. Therefore, Treasury cautioned that while $1.0 billion in PT-BAIT payments have been received year-to-date, including $972.1 million in December, credits offsetting most of these payments are expected before the end of FY 2021. Ultimately, the PT-BAIT collections are largely a timing shift rather than a new State revenue stream.
The Corporation Business Tax (CBT), which is the second largest General Fund revenue source, reported $729.2 million in December, up $186.3 million, or 34.3 percent above the same month last year. Refund payments continue to fall significantly below last year, while estimated payments rose as taxpayers began paying the extended 2.5 percent surtax. Year-to-date through December, CBT collections of $1.792 billion are essentially flat with the same period last year.
December collections for the GIT, which is dedicated to the Property Tax Relief Fund, totaled $1.493 billion, up $230.6 million, or 18.3 percent, above last December. However, year-to-date, GIT collections of $5.812 billion are down $178.6 million, or 3.0 percent. Much like November, December’s GIT collections were boosted by the temporary 21.3 percent withholding rate instituted on high-income earners due to the fact that the new 10.75 percent marginal tax rate on millionaires that was signed into law in late September was retroactive to the beginning of 2020. In addition, December receipts were also boosted by the fact that there was an extra employer withholding payment compared to the year before, a timing issue that will be reversed in January.
The Sales and Use Tax, the largest General Fund revenue source, reported collections of $834.0 million in December, an increase of $21.5 million, or 2.6 percent, which is the fifth consecutive month of growth for this revenue. Due to the one-month lag in the reporting of Sales Tax collections, December revenue reflects November consumer activity. Year-to-date, Sales and Use Tax collections of $4.455 billion are up $168.4 million, or 3.9 percent.
Please see the attached chart for monthly and yearly comparisons.