BY JOHN REITMEYER
NJ Spotlight
In a boost to Gov. Mikie Sherrill’s and the Legislature’s first budget together, state tax receipts soared over the first quarter of the fiscal year despite economic concerns about inflation and the ongoing war in Iran.
In all, state tax collections during the months of July, August and September totaled more than $10 billion, up nearly 19% year over year, according to figures released Thursday by the state Department of the Treasury.
But Treasury officials also added some important context to the report on the strong quarterly receipts, noting they were bolstered in some notable cases by financial trends that are unlikely to hold throughout the course of the state’s full July-to-June fiscal year.
These include an extra state income tax withholding payment that lifted September collections this year. Federal tax changes enacted roughly a year ago that initially dampened state business tax collections in 2025 have also since rebounded, the officials said.
Still, the news of a strong first quarter of tax collections is likely to be welcomed with open arms by Sherrill and fellow Democrats who control the Legislature.
Sherrill and lawmakers adopted a new annual budget in late June that calls for a record-high, nearly $61 billion in spending by state government through June 30, 2027.
Supported in part by a budget surplus, the spending hike was approved even though the state treasurer and other key officials had raised concerns about uncertainty caused by inflation, high gas prices and other economic pressures related to President Trump’s ongoing war in Iran.
Total revenues will need to increase by nearly 4% year over year through the end of June to keep the current fiscal year budget on track, according to Treasury’s latest report.
Despite the caveats, the revenue news signals an undeniably good start to the budget year, and likely provides some additional margin for error.
Total collections more than quadrupled the year-end target over the first quarter, with the income, sales and corporation business taxes all scoring impressive growth.
First quarter income tax receipts, which were bolstered by the extra withholding payment, were up 11% year over year, officials said.
The income tax is the largest single source of revenue for the state budget, generating more than $23 billion annually in dedicated funding for things like aid for K-12 public schools and direct property tax relief programs.
September income tax receipts were up 15% compared to the same month last year, but Treasury officials indicated the monthly revenue boost was closer to 4%, after adjusting for the extra withholding payment.
The latest state unemployment report, released Thursday by the state Department of Labor and Workforce Development, provided some additional good news. New Jersey’s economy added 16,000 private sector jobs last month as the unemployment rate decreased slightly, to 4.2%.
Meanwhile, quarterly sales tax collections were also running ahead of last year’s pace through the end of September, by about 12%, according to Treasury.
The sales tax is the largest source of revenue for the state budget’s general fund, producing more than $14 billion annually to help cover many of state government’s key programs and services.
Treasury officials attributed the quarterly increase in sales tax receipts to economic activity across a number of areas, including “technology‑oriented sectors.”
The corporation business tax collections increased the most among the primary sources of revenue. Up more than 80% in the first quarter, the corporation business tax, or CBT, is a major of source of revenue for the budget’s general fund, bringing in more than $4 billion annually.
Still, Treasury officials immediately cautioned the latest CBT receipts are “not fully indicative of future revenue performance.”
Last year in September, the monthly CBT collections were “significantly understated” by taxpayers due to a sharp drop in estimated payments as many adjusted to federal tax changes enacted by Congress earlier that year, Treasury officials said.
“A rebound in this September’s CBT collections was expected as those effects unwound, meaning much of the increase reflects a one‑month correction rather than a broader trend,” they said.
Year-to-date realty transfer fee collections were up by more than 6% through the end of September, but state Lottery revenues were down over the first quarter of the fiscal year, by nearly 8%.
