(The Center Square) – Critics are blasting an unemployment insurance (UI) tax increase they say will cost New Jersey businesses and some nonprofits roughly $252 million this year. But a state official said the increase is needed to replenish the state’s unemployment trust fund.
Critics said Gov. Phil Murphy, who is currently on vacation in Italy, should have used a portion of the roughly $6.2 billion the state received from the federal government as part of the American Recovery Plan (ARP).
“Increasing employer taxes 20 percent now was the height of bad policy and arrogance,” state Sen. Michael Testa, R-Cape May/Cumberland/Atlantic, said in a Monday statement. “The tax increase was avoidable. But the Governor demonstrated he doesn’t care and symbolically sniveled ‘Let them eat cake’ to employers from his $10 million Italian villa.
“Even Marie Antoinette’s cake is [preferable] to choking on an avoidable $252 million tax increase,” Testa added.
On Friday, the state labor department announced the new rates on their website, alerting businesses that the state is “using Tax Table C for 2021-2022.” According to the New Jersey Business & Industry Association (NJBIA), the tax increase will likely start on Oct. 1.
However, according to NJBIA, taxes could continue to rise for employers if the state does not use federal aid, totaling $885 million over the next three years. If the state moves to new tables, employers could see a $296.6 million increase in 2022 and a $336.4 million increase in 2023.
“It’s good that employers now know what they’ll have to pay Oct. 1, but it’s disappointing that New Jersey has not followed the lead of other states around the country in replenishing its unemployment insurance fund with federal relief money,” NJBIA Vice President of Government Affairs Christopher Emigholz said in a post on the association’s site.
“It’s something of a saving grace that employers will have three years to pay this large increase, instead of being hit all at once,” Emigholz added. “But we were certainly hoping that New Jersey would help businesses avoid an added tax on jobs as they’re looking to recover employees.”
According to the Department of Labor & Workforce Development, between March 21, 2020, and Aug. 7, the state has paid out $33 billion in benefits, including $7.9 billion in New Jersey UI benefits.
The new payroll tax applies to the July-September period, and employers will see it when they file their third-quarter taxes by Oct. 30, labor department spokesperson Angela Delli Santi told The Center Square. However, Santi pushed back on the assessment of the change as news.
“I wouldn’t really categorize this as ‘news,’ since adjustments in the payroll tax rate are possible every year, and are based on the balance in the Unemployment Trust Fund, which is used to pay unemployment benefits,” Santi said in an email. “… Gov. Murphy signed legislation lessening the impact of unemployment tax rate increases by extending them out over three years, as opposed to a single year.”