New Jersey employers were told shortly before the weekend that they’ll have to pay a combined $250 million in new taxes to replenish the unemployment trust fund, after it was depleted during the COVID-19 pandemic.
On Aug. 13, the state’s Department of Labor and Workforce Development posted a notice online that employers will have to begin paying a higher payroll tax rate to make up that money.
According to the New Jersey Business & Industry Association, that tax hike kicks in on Oct. 1.
It’s the first of three increases, one per year, meant to put money back into the state unemployment fund after more than 2 million people filed jobless claims over the past 17 months. During that time, Gov. Phil Murphy enacted business closures that practically shut down the state economy, in a bid to halt the spread of the COVID-19 pandemic as it first swept across the state. Most of those restrictions had only just been lifted in May.
All told, employers could be on the hook for nearly $1 billion to refill that money.
Murphy in response to record-high unemployment levels signed a measure spreading out the increases over a three-year period.
Generally with payroll taxes, the worker and employer chip in for the amount paid to the state. Had the law not gone into effect, they would have paid a much steeper rate.
Business groups and Republican state lawmakers pushed for Murphy and the state Legislature to allocate money from the New Jersey’s $6.5 billion in federal aid toward replenishing the fund. So far, they’ve not opted to do so.
“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 NJBIA.
Under the 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.
State Sen. Steven Oroho, R-24th District, a ranking GOP member of the Senate Budget and Appropriations Committee, called the tax increase “avoidable,
” had the state used federal money.
“We should have used COVID relief money that the state already has in its possession instead of adding burdens to job creators,” he said in an Aug. 13 statement.
Murphy, when pressed in June about using funds, maintained that “our small businesses need the help,” promising that “ we are going to stay at it.”