Income Tax, ECONOMIC OPPORTUNITY FOR ALL, GDP
GSI Analysis: State Revenue Report – New taxes Increase Some Revenues, Others Show Weakness
New Jersey’s tax revenue numbers for July were relatively in line with projections from the state.
July marks the end of the 2018 fiscal year and the beginning of the 2019 fiscal year. July also marked the start of many new taxes New Jerseyans will soon be responsible for.
On Friday Aug. 17, the New Jersey Department of the Treasury released the state’s July tax revenue numbers. The state touted the 7.9 percent ($149 million) increase in tax revenues compared to July 2017.
Compared to tax collections from 2017, the state experienced increases in tax revenue in multiple categories including sales taxes and income taxes. However, with the official start of the 2019 fiscal year, analysts have speculated how the tax increases that the New Jersey legislature passed in the most recent state budget will impact both the state’s tax revenue and the overall state economy.
IMPACT OF NEW TAX INCREASES
Tax collections in some categories such as motor fuels, motor vehicles and cigarette tax collections have fallen from 2017 levels.
The decline in the tax revenue from declining gasoline sales may lead to another round of tax increases as soon as next week according to published reports. A 2016 gas tax increase raised the per-gallon tax by 23 cents and established a minimum annual revenue level ($1.16 billion) that the state must collect in gas taxes for infrastructure maintenance. Any shortfalls in gas tax revenue from drops in sales must now be countered by further increases in the tax.
The state’s current per-gallon tax for gasoline is 37.1 cents, it’s anticipated the per-gallon tax could increase to 40 cents or higher. While the increased tax would obviously bring in more revenue, any increases will further erode the state’s existing competitive advantage with fuel prices over neighboring states like New York (43.88) and Pennsylvania (58.20).
Other tax increases New Jersey lawmakers passed during the most recent budget include new taxes on ride-sharing services like Uber and Lyft, new home-sharing taxes for platforms like Airbnb and a 2.5 percent “temporary” corporate tax increase.
We will be watching for impacts on these categories in the months to come.
BELOW EXPECTATIONS PERFORMANCE OF NEW TAX SOURCES
Aside from the tax increases that the state legislature passed, two federal policy changes had state legislators hoping for more tax dollars from Sports Betting and online purchases made in the Garden State.
Since sports betting was allowed at New Jersey casinos starting June 14th, $57 million in sports bets were recorded in the state through July. However, that equated to only $620,000 in tax revenue for the state. Some analysts have commented on how sports betting tax revenues would have to increase significantly to live up to legislators’ estimates for $25 million in additional revenue the state would receive during fiscal year 2019 from the new activity.
Additionally, New Jersey already collects sales taxes on many online purchases so it’s unclear how much of an increase in online sales tax revenue the state will experience.
July is treated as the “13th month” of the fiscal year since cash collections for the state include money from fiscal year 2018 as well as fiscal year 2019.