Unprecedented tax receipts add twist to fiscal battle
The budget debate in Trenton took another unexpected turn on Monday, as officials from the state’s Office of Legislative Services revealed unprecedented tax revenue numbers.
“We saw an unprecedented surge in April from its already high historical base,” said David Drescher, head of OLS’s revenue, finance and credit section. “As a result, we have increased our GIT forecast by $3.6 billion over two years. This will leave the state considerably better positioned than we originally projected, some $6.9 billion or 7.7% higher than the executive’s forecast just a few months ago.
Drescher said calling the surge a surprise would be an understatement. The best explanation he could give had to do with the boom in financial markets and an overheated economy over the past 12 months.
“In light of the stock market slide that began early this calendar year, we do not expect this behavior to continue,” Drescher said. “The main question is how sustainable is the tremendous revenue growth we’ve seen over the past two years going forward?”
Senate Budget and Appropriations Chairman Paul Sarlo, D-36th District, also highlighted the magnitude of the figure:
Unprecedented, quite frankly, I think, in the history of the State of New Jersey.
Unsurprisingly, there are different ideas about how to allocate these funds and what to prioritize.
Gov. Phil Murphy has proposed an ANCHOR property tax program that his administration says would distribute $900 million in property tax relief to nearly 1.8 million homeowners and renters. But, Republicans call the plan disappointing and have instead offered their own “Give It Back” tax rebates that they say would combine to return $4.5 billion in direct tax relief to New Jersey families.
“Tax collection reports make it clear that the Murphy administration needs to recognize that its tax policies are pulling at least $5 billion more out of taxpayers’ pockets than the governor predicted in March, and possibly billions moreover,” said Senate Republican Leader Steven Oroho, R-24th District, “When New Jersey families grapple with soaring prices and inflation, we believe Governor Murphy must commit to immediately return these surpluses to the families who are suffering today. We plan to expand the “Give It Back” discounts that Senate Republicans have already offered.
“My fellow Republicans and I have offered to put $1,500 in direct relief into the pockets of New Jersey families to help with the pain caused by soaring gas prices and inflation,” said Declan O’Scanlon, Senate Republican Budget Director, R-13th District. “As we learn that the Murphy administration has collected billions more in taxes than he previously acknowledged, it’s getting harder and harder for the governor not to ‘give it back’ to the taxpayers as he has proposed the Republicans. In fact, we believe there is room to expand our tax relief plan even further in the final budget.
Meanwhile, Assembly Speaker Craig Coughlin, D-19th District, in a statement following the revenue increase update, said it was good news.
“We have extra money this year, and New Jersey needs tax relief now. In this year’s budget, I will be emphasizing the largest tax relief program in New Jersey’s history. state,” Coughlin said. “I look forward to working with legislative leaders and the governor over the coming weeks to craft this proposal and deliver on this promise for the people of New Jersey. With reasons to be cautious on the horizon, we will also make sure to leverage our surplus so that we are prepared for any storm that comes our way.
“With incomes so much higher than all the projections could have been, don’t you think it’s a really good time to maybe relax, say, the CBT (corporate tax) or the tax on income,” the state senator asked. Michael Testa, R-1st District. “And isn’t it time now that our residents, our citizens of the state of New Jersey need relief?”
While lawmakers have different ideas about how to spend the windfall, which will be chopped up over the next few weeks, one thing is certain: New Jersey’s financial health appears relatively stable, especially coming out of the pandemic.
“The state has many resources that will help weather any future disruptions that may be on the horizon,” Drescher said.