New Jersey Businesses May Be Spared Steep Tax Jump
TRENTON, N.J. (AP) — New Jersey businesses would be spared a sudden major boost in the unemployment tax under legislation that calls for it to be phased in to help restore the state’s depleted unemployment insurance fund.
The Senate Labor Committee approved a bill Thursday that would spread the $750 million tax increase over three years.
“For the business community this bill is very positive and forward-thinking,” said a co-sponsor, Sen. Fred Madden of Turnersville. “It will over the next three years let business owners have predictability.”
In a rare display of bipartisan agreement, lawmakers from both parties recognized the need for a gradual tax rate increase while businesses recover from the recession. Unemployment remains at 9.3 percent, and small businesses report that they are still laying off, not hiring, workers.
The unemployment tax rate is set automatically by how much the fund has in reserve in March of each year. Because the fund has no reserve this year, and New Jersey is one of many states borrowing from the federal government to meet its unemployment claims, employers face the maximum tax rate increase possible, about $177 more per employee, if the Legislature doesn’t act.
The bill under consideration lowers the amount of the increase to about $58 more per employee, on average, on July 1, according to the most recent estimate from the Office of Legislative Services, the Legislature’s research arm. Businesses that lay off workers frequently are assessed a higher per employee tax than those that don’t.
Next year’s increase would be about $76 per worker. The business community endorsed the proposal. Michael Egenton of the New Jersey Chamber of Commerce said the bill averts “sticker shock” to businesses.
“Yes, your taxes are going up, incrementally, but it could have been a lot worse—you could have gotten a larger tax increase,” he said.
New Jersey has borrowed more than $1.6 billion so far from the federal government to pay unemployment claims.
The fund went broke, in large part, because more than $4 billion was diverted from it to other programs, like hospital charity care.
One provision in the bill requires larger reserves to be built up before employer taxes are reduced. Voters last year approved a constitutional amendment banning future raids of the fund.
The full Assembly unanimously passed the bill Monday. It next moves to the Senate Appropriations Committee.
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