N.J. moves to ease $919M tax increases businesses will get socked with because of high unemployment

Posted Oct 29, 2020

New Jersey lawmakers are considering a bill to lessen the blow of a $919 million unemployment payroll tax increase businesses will be hit with next year to begin replenishing the unemployment trust fund.

More than 1.7 million New Jersey workers have sought unemployment benefits since mid-March, when Gov. Phil Murphy ordered much of the state shut down to slow the spread of the coronavirus. The state has paid out more than $5.4 billion to people out of work, depleting the unemployment trust fund.

The Unemployment Trust Fund is financed through employer and employee contributions. Employees all pay the same tax rate on their first $35,300 in wages, while an employer’s contributions depend on the overall fund balance and how many of their own employees have claimed benefits.

The poor health of the fund likely will trigger a $919 million increase in employers' unemployment payroll taxes come July, according to an estimate from the nonpartisan Office of Legislative Services.

With widespread job losses and sky-high claims, the trust fund is likely to automatically move to the highest fee structure, once the state is required to conduct the annual assessment of the trust fund in March, Department of Labor and Workforce Development Commissioner Robert Asaro-Angelo has said.

Companies that lay off more employees and have the worst experience ratings, like seasonal businesses and building trades, will suffer the harshest blow, according to the OLS memorandum.

The bill (A4853), passed 72-0 on Thursday, would phase in the increased unemployment payroll tax hike through July 2023. It must still be passed by the state Senate and signed by the governor.

Assemblyman Hal Wirths, R-Sussex, a former labor commissioner under former Gov. Chris Christie, has said the Legislature also passed a bill, spreading an increase in employer contributions out over several years after the trust fund went into the red during the Great Recession.

“You don’t have to do those drastic jumps all at once,” Wirths said previously. “The employers would get destroyed by a shift like that.”

The legislation also would not hold layoffs during a state of emergency against an employer. Those layoffs could otherwise hurt their experience rating and increase their required contributions to the trust fund.

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published this page in News and Politics 2020-10-30 02:57:24 -0700