NJBC announced on behalf of the state’s business community, we are writing to express our strong support for S-733 (Madden, Singleton)/A-2152 (Greenwald) as it addresses three desperately needed fixes for our unemployment insurance (UI) payroll tax increase and the UI Trust Fund that is funded by that tax. This bill and the three changes it makes below apply to the Legislature’s focus on affordability, especially for small businesses that pay about half of any UI tax increase.
• Reduce Pending Payroll Tax Increase by More Than $300 Million: New Jersey businesses are currently paying $252 million in added taxes to replenish the state’s depleted UI Trust Fund. That number will grow by another $296.6 million in FY23 and another $336.4 million in FY24 for a total increase as of now of almost $900 million more than employers paid in UI Fund taxes before the pandemic. The legislation would eliminate that last UI tax hike of $336.4 million for FY24 by halting the increase from columns D to E in the chart that determines payroll tax rates.
• Pays Off Federal UI Loan & Avoids Unnecessary Interest Payments: S-733/A-2152 will eliminate the federal loan and interest payments we make on it by using a small portion of ARPA funds available to the state. While the business community has advocated for a full replenishment of the UI fund, we recognize the demands for federal funds are far and wide in our state. We believe the targeted use of federal funds in this legislation finds a compromise that will provide much needed relief for the business community and support our state’s fiscal health. Paying off the loan more quickly as the bill proposes will expedite the replenishment of the fund and potentially lead to a quicker improvement in its health and a quicker payroll tax decrease down the road. Paying off the loan this year also importantly avoids an increase in the Federal Unemployment Tax (FUTA).
• Transparency on a State Tax Increase That is Not Controlled by State Legislature: S-733/A-2152 will establish a procedure for the New Jersey Department of Labor & Workforce Development to better notify the Legislature about the fund and the possible tax changes stemming from it.
UI payroll taxes are not a tax on income, property, corporate profit, or wealth. UI payroll taxes are a tax on the mere existence of a job. At a time when businesses struggle to recover jobs, the state should not make job creation and retention less affordable. Additionally, failing to pass this bill would hurt New Jersey’s competitive position relative to other states, as many have already taken actions to address their UI fund and avoid making job creation and retention less affordable. This bill also has precedent, as the New Jersey Legislature created a law, supported by the business community, to artificially adjust columns
for the UI payroll tax rate during the Great Recession and earlier in the pandemic. This bill constitutes an extension of those precedents.
The solution to use federal money to support the UI Fund is not unique to New Jersey, as many states throughout the nation have directed a portion of their CARES Act or ARPA (American Rescue Plan Act) funding into their UI Funds.
In summary, S-733/A-2152 will reduce a three-year, $1 billion tax hike to a two-year $600 million increase by avoiding the most onerous column increase, increase transparency and avoid unnecessary interest payments and an automatic federal tax increase. We ask for your co-sponsorship and support of S-733/A 2152. If you have any questions or would like to further discuss our concerns, please contact Chrissy Buteas, NJBIA Chief Government Affairs Officer at email@example.com or Christopher Emigholz, Vice President, Government Affairs at firstname.lastname@example.org.