Bill gains bipartisan backing for federal COVID funds to prevent $250M tax hike (updated)

New Jersey employers were told on Aug. 13 – just hours before the start of the weekend – that they’ll have to pay more than $250 million to replenish the state’s unemployment trust fund after it was depleted during the COVID-19 pandemic and ensuing record-high unemployment. Now, two South Jersey Democratic state senators are backing a mostly Republican-led effort to use federal funds from the Biden administration to the tax hike on employers.

Sen. Troy Singleton, D-7th District, and Sen. Dawn Addiego, D-8th Distric, both say funds from the American Rescue Plan should go toward staving off the tax increases that would otherwise be put on employers.

Businesses will have to begin paying a higher payroll tax rate, according to the state’s Department of Labor and Workforce Development to make up for the funds, effective Oct. 1–the first of three tax increases for employers after Gov. Phil Murphy approved a bill this year to space them out.

Business groups and Republican lawmakers panned the tax increase, and pushed for Murphy and state lawmakers to use funds from the federal American Rescue Plan. Under that measure, which President Joe Biden approved in March, the state is getting more than $6 billion from the White House.

Singleton

“[O]ther states have used federal assistance to replenish the funds and it is my hope that New Jersey will do the same to avoid this unwelcome and untimely burden on our businesses,” Singleton said in a letter to Murphy, Assembly Speaker Craig Coughlin, D-19th District and Senate President Stephen Sweeney, D-3rd District.

Addiego, who formally switched from the Republican to Democrat party in early 2019, suggested in a statement later in the day on Monday that the state has “plenty of federal dollars to go around.”

“[T]here is no reason businesses should be burdened with an unemployment tax hike when laying off employees was the only way they could stay afloat through last year’s shutdown,” she continued.

Murphy, who is away in Italy, 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 Coughlin and Sweeney, the gatekeepers in their respective chambers for any legislation.

Lt. Gov. Sheila Oliver joings Gov. Phil Murphy as he announces extensive social distancing measures in Trenton to mitigate further spread of COVID-19 on March 16, 2020. – EDWIN J. TORRES/GOVERNOR’S OFFICE

Cecilia William, a spokesperson for Coughlin, said that the three state leaders were looking at “further [unemployment insurance] rate mitigation beyond the three-year easement,” but did not elaborate.

“The Legislature has been committed to helping businesses and the economy recover,” she added, pointing to the hundreds of millions of dollars in COVID-19 relief for business.

Sweeney’s office was not immediately available for comment.

“The Legislature devised a process by which we had to replenish the unemployment trust fund, that is a formula, it is in statute,” Acting Gov. Sheila Oliver told reporters following an unrelated Aug. 16 afternoon event in New Brunswick. “If the Legislature goes in a different direction, time will tell.”

“I would ask businesses to look at how many people have had to rely on unemployment to survive for close to two years. I think that all of us have a responsibility to try to just help our people in New Jersey survive,” she said.

Plan B

Under the Republican- and business lobbying group-backed proposal, the state would use $1.5 billion to replenish the trust fund and $1 billion to repay loans the state took out last year to continue dolling out unemployment benefits.

“It is a small saving grace that employers get to pay this added tax over three years, instead of paying all at once. But at the end of the day, this is a large tax not on income, profits or assets, but on actual jobs as employers desperately look to recover employees,” reads an email from Bob Considine, a spokesperson for the New Jersey Business & Industry Association.

Singleton maintained that unemployment replenishments would nonetheless be an acceptable use of federal ARP money.

“The money can be used to … address negative economic impacts,” Singleton said. “Certainly, an increase in the unemployment insurance tax would qualify as a steep negative economic impact.”

“This increase comes at a particularly difficult time for many of our state’s businesses who are just beginning to re-establish their economic footing,” he said.

Editor’s note: This story was updated at 3:46 p.m. EST on Aug. 16, 2021, to add Sen. Dawn Addiego, a Democrat, as also supporting the plan, in addition to Sen. Troy Singleton. Comments were also added from Assembly Speaker Craig Coughlin’s office.