Two more Democratic state senators are asking Gov. Phil Murphy to use some of New Jersey’s federal COVID-19 relief funds to prevent a tax hike that businesses are expected to see this Oct. 1, something the administration contends is not possible.
The tax increases are meant to refill the state’s unemployment trust fund, which was drained over the last year-and-a-half amid record-high joblessness and business closures stemming from the pandemic. New Jersey has paid out an estimated $33 billion in state and federally-funded unemployment benefits during that time.
But state Sen. Vin Gopal, D-11th District, and Linda Greenstein, D-14th District, issued individual press releases on Aug. 31 saying Murphy should tap into the state’s $6.2 billion to stave off the roughly $250 million in additional taxes on Oct. 1.
“Businesses in the state are at a critical juncture as they try to recover from the impacts of the COVID-19 pandemic,” reads a letter from Greenstein addressed to Murphy. “This tax increase only makes their recovery that much more difficult.”
While it was almost exclusively Republicans who’ve for months backed the notion of using ARP funds to prevent the tax hike, lately several Democrats have come on board as well, after the tax increase was announced on Aug. 13.
They include Assemblymen Jamal Holley, D-20th District, and Gordon Johnson, D-37th District, and state Sens. Dawn Addiego, D-8th District, and Troy Singleton, D-7th District.
“The depletion of the unemployment trust fund was caused by the shutdowns required to fight COVID-19,” Johnson wrote to Murphy on Aug. 19. “It was not due to the actions of individual employers, yet they will be penalized for taking the responsible steps.”
Many other states are using federal funds for similar purposes, according to Johnson and Singleton.
State officials contend that to do so would not be possible this year because the federal aid under the American Rescue Plan came into the state’s coffers too late in the budget cycle, something Republicans have disputed.
The Oct. 1 tax rate increase is the first of three businesses will pay, one each year after Murphy signed a bill to space out the upticks.
“I signed a law several months ago that would smooth this increase out,” Murphy said last week. “No state in America per capita has put more money into small businesses than New Jersey.”
“[F]olks should expect we will be doing more,” he continued. “So, whether it’s specific or not to the unemployment insurance question, you should know that we are constantly thinking through how we can continue to plus up help and aid to small businesses and we will do that.”
Business groups and Republican lawmakers panned the tax increase and pushed for Murphy and state lawmakers to use funds from the federal ARP.
Darryl Isherwood, a spokesperson for Murphy’s office said that the rates for employers were set into law when Murphy approved the bill in January to space out the unemployment contributions, “making any contribution of federal funds irrelevant in the current fiscal year.”
On top of that, because the ARP was signed in March and the funds were not given out to the states until May, that money ultimately missed the March 31 deadline for impacting this year’s unemployment tax rates, Isherwood added.
Murphy is allowed to use $200 million of ARP money at his own discretion, with caps of $10 million per spending item.
Anything else would need legislative approval and need the sign-off of Assembly Speaker Craig Coughlin, D-19th District and Senate President, D-3rd District, the gatekeepers in their respective chambers for any legislation. Funds could be used in future budget years for similar proposals, said one administration official.