(The Center Square) – A bill that would help New Jersey employers avoid a massive unemployment payroll tax hike all at once was unanimously approved by the Senate Labor Committee on Friday.
S-3011 would reduce an increase in unemployment insurance (UI) taxes related to benefits paid during the pandemic by spreading out the payroll tax hike over an extended period of time.
New Jersey’s previously plentiful $2.79 billion unemployment trust fund has paid out $4.7 billion in benefits to 1.6 million workers since mid-March, according to NJ.com.
The state borrowed $1.7 billion from the federal government to keep the trust fund solvent during the pandemic.
A low balance automatically triggers an increase in payroll taxes in order to replenish the exhausted trust fund.
Without S-3011, New Jersey businesses could be on the hook for a $1 billion tax increase starting in July 2021.
Christopher Emigholz, vice president of government affairs for the New Jersey Business and Industry Association, testified to members of the Senate Labor Committee about how the bill could alleviate businesses hurting due to the economic impact of the pandemic.
“Spreading it out makes all of the sense in the world,” Emigholz said. “It’s helping the [businesses] that were hit hardest. Those businesses that are on the brink, those businesses that have already made tough choices.”
In prepared remarks to the Senate Labor Committee, Emigholz said that a payroll tax increase “would most penalize struggling employers who had layoffs that were beyond their control during the pandemic.”
“Businesses are already down, already facing new taxes and already burdened by new regulations, and this payroll tax increase on top of all of that would further devastate our job creators,” Emigholz said.
The unemployment taxes paid by a business varies on its layoff experience as well as the balance of the trust fund. A tax table with a sequence of tiers and columns is calculated to determine the rate.
Without state intervention, businesses would pay the amount in the maximum column E+10%.
The proposed legislation adjusts the calculation of experience ratings for struggling businesses and slows down the increase so that the tax hike would be paid over the course of the next few years when the economy improves.
Emigholz also told lawmakers that he is hopeful about potential future stimulus coming to New Jersey from the federal government, which could help businesses avoid the tax increase altogether.
“If that happens, we hope that it could be applied to our federal loans that were taken out for the UI fund or applied to this,” Emigholz said.