State officials forecast multibillion-dollar surge in revenue. Lawmakers want to use it for more tax relief.
New Jersey officials on Monday forecast a multibillion-dollar surge in tax revenue into the state’s coffers, just weeks before the June 30 budget deadline.
Details: The nonpartisan Office of Legislative Services and the state Department of the Treasury are both forecasting billions of dollars more in revenue, primarily driven by a spike in income tax filings.
Treasury’s combined two-year forecasts are $7.8 billion higher than its initial forecasts in March. For Fiscal Year 2022, Treasury officials are projecting $4.5 billion more, for a total of $51.4 billion. For Fiscal Year 2023, which begins July 1, they are projecting $3.3 billion more, or $50.6 billion in all.
Meanwhile, OLS increased its revenue forecast by $3.6 billion over the same two years. If those estimates are borne out, the state would have some $6.9 billion more in tax revenue than what the Murphy administration initially estimated in March.
“To call this surge in the [income tax] a surprise would be an understatement, said David Drescher, section chief for revenue, finance and appropriations at OLS, told the Senate Budget and Appropriations Committee.
Why the surge? According to OLS, the federal government as well as a number of states, including New Jersey, saw huge spikes in April tax payments. The best explanation for the jump in revenue, Drescher said, is related to the “boom in financial markets and overheated economy over the past 12 months.”
“Retail investment gains, mergers and acquisitions, and conventional capital gains are all high,” Drescher said. “In light of the dive in stock markets since the start of this year, we should not expect this kind of revenue gain to continue.”
What to do with the extra cash: There was no shortage of ideas for what should be done with the money.
Assembly Speaker Craig Coughlin said in a statement Monday he wants this budget to include the “largest tax relief program in state history.”
“I look forward to working with legislative leadership and the Governor over the coming weeks to craft this proposal and deliver on that promise for the people of New Jersey,” Coughlin said. “With reasons to be cautious on the horizon, we will also make sure to leverage our surplus so we are ready to weather any storm coming our way.”
Senate Budget Chair Paul Sarlo (D-Bergen) said he wants a surplus that’s in the range of $7 billion to $8 billion. That’s up from the $6 billion he was seeking prior to the latest revenue update. He said he was also open to discussing more tax relief with Coughlin and paying down additional debt.
Similarly, Deputy State Treasurer Aaron Binder said the Murphy administration would like to see a beefed up surplus.
“We don’t have a specific number [for the surplus] but with the resources coming in, we want as large a surplus as possible,” said Binder, who was subbing in for state Treasurer Elizabeth Maher Muoio as she recovers from Covid-19. Other potential areas, Binder said, could be paying down debt, and providing additional property tax relief to residents.
Republicans, for their part, have drafted bills that would give direct rebates back to residents.
TAX RELIEF: As part of his $48.9 billion budget, Murphy has proposed the ANCHOR Property Tax Relief Program, which would provide average tax rebates of $700 for homeowners with incomes of $250,000 or less and $250 for tenants whose income is $100,000 or less.
The new program would replace and expand the current Homestead Rebate Program, and provide rebates to nearly 1.8 million New Jerseyans, administration officials have said.
What’s next? OLS and Treasury officials will appear before the Assembly Budget committee on Wednesday.