NJ February Tax Revenue Down 2.8% Due to Early Refunds

New Jersey’s February tax collections came in below year-ago levels, but state Treasury officials say the drop tells only part of the story.

The state Department of the Treasury reported March 13 that February revenue collections for the major taxes totaled $3.091 billion, down $89.4 million, or 2.8%, compared with the same month last year. The culprit, according to Treasury, was timing. The agency pushed out its first large batch of Tax Year 2025 income tax refunds in late February rather than its usual early-March schedule, pulling a significant chunk of outflows into the prior month’s ledger.

For New Jersey workers waiting on refund checks, that shift means money arrived a bit sooner. For the monthly revenue report, it made February’s numbers look worse than the underlying trend warrants.

The Gross Income Tax, which feeds directly into the Property Tax Relief Fund, collected $1.253 billion in February, down $201 million, or 13.8%, from February last year. Treasury said that decline was entirely a product of the early refund issuance. Employer withholding, the steady stream of payroll deductions that reflects actual labor market conditions, actually showed strong growth during the month. Strip away the timing effect on refunds and February’s income tax picture looks considerably healthier.

Zoom out to the full fiscal year and the GIT story improves sharply. Year-to-date collections of $12.469 billion are running $818.9 million, or 7%, ahead of the same period last year. That suggests New Jersey workers are earning more and that employers are withholding at higher levels, both reasonable signals of a functioning labor market.

The Sales and Use Tax offered a cleaner read for February, since no similar timing quirk affected that revenue stream. Collections of $974.9 million came in $21.1 million, or 2.2%, above last February. The SUT is the state’s largest General Fund revenue source and its steady growth tracks consumer spending across the state’s retail, food service, and hospitality sectors.

The Corporation Business Tax is a different story, and it has been for months. February CBT collections actually went negative, coming in at minus $22.6 million, a swing of $43.6 million below last year’s already-modest February figure. That number sounds alarming, but Treasury notes that February is typically a low-collection month for the CBT, with refunds commonly outpacing payments. Still, the fiscal year context is harder to explain away. Year-to-date CBT collections of $1.389 billion are down $861.4 million, or 38.3%, from the same period last year. The CBT has posted negative comparisons for eight straight months. The last time the tax produced a positive month was June 2025.

Treasury attributes the prolonged CBT weakness to elevated refund levels, many tied to tax periods before 2024, along with declines in both final and estimated payments from corporations. That combination has punched a notable hole in General Fund projections and will factor into budget negotiations heading into fiscal year 2027.

On the brighter side, the Insurance Premiums Tax came in strong. February collections of $306 million were $49.9 million, or 19.5%, higher than last year, partly because last February’s comparable figure was reduced by prior-year tax credit refunds. The fiscal year-to-date IPT total of $255.9 million is running 58.1% above the same period last year, reflecting both the timing of prepayments and the sheer scale of the state’s insurance sector.

The Petroleum Products Gross Receipts Tax added $137.3 million in February, up $7.1 million, or 5.4%, from a year ago.

Taken together, fiscal year-to-date major revenues of $27.991 billion are up $879.5 million, or 3.2%, over the same stretch last year. Treasury said it expects moderate growth to continue through the remainder of fiscal year 2026, consistent with projections included in Governor Murphy’s budget message for fiscal year 2027.

The monthly dip generated by the early refund processing should reverse in March, when those funds would normally have been issued. The persistent CBT underperformance, though, is the number budget watchers in Trenton will be tracking most closely in the months ahead.