New Jersey businesses are grappling with nearly $1 billion in tax increases over the next three years after a surge in unemployment claims during the pandemic depleted the state’s Unemployment Insurance Trust Fund.
State lawmakers are now looking to ease some of that burden with legislation to provide tax credits to small employers based on expected increases in their unemployment insurance contributions.
Businesses are confronting about $250 million in added taxes this fiscal year and an additional $600 million or more over the next two years, according to the New Jersey Business and Industry Association.
A bill, A-3683, sponsored by Democratic Assembly members Roy Freiman, Louis Greenwald and Chris Tully, would provide corporate business tax and gross income tax credits to small businesses that have not used other grants and subsidies to offset the increases.
“This legislation will help over 70 percent of New Jersey businesses pay for scheduled unemployment insurance tax increases,” Freiman, D-Somerset, said in a statement released Thursday.
The measure, which was approved on Thursday by the Assembly Commerce and Economic Development Committee, would also require the state Department of Labor to provide a minimum 30-day notice to employers when the unemployment insurance rate will change.
Assembly Majority Leader Lou Greenwald, D-Camden, said the legislation will help relieve some of the pressure on small businesses that “are the backbone of the economy.”
“We’re putting money back into the pockets of small business owners allowing them to grow their operations and invest in their employees,” Greenwald said in a statement.
When New Jersey’s Unemployment Insurance Trust Fund became less solvent during the pandemic, a formula used to determine business contributions triggered automatic tax increases, according to Christopher Emigholz, vice president of government affairs for the New Jersey Business and Industry Association.
“The fund was drained more so than at any point in history, and now it needs to be replenished,” Emigholz told NJ Advance Media during an interview last month. “Other states have taken action to use federal funds to offset this tax increase.”
Republican state lawmakers have been calling on Gov. Phil Murphy to replenish the fund with a portion of the $6.2 billion in coronavirus aid the state received through President Joe Biden’s American Rescue Plan enacted in March 2021.
Shortly after Biden signed the measure, New Jersey Republicans unveiled a proposal for spending the money that included using $2.5 billion to stabilize the unemployment insurance fund and avoid employer tax increases.
The Murphy administration has yet to release a detailed plan for more than $3 billion in federal coronavirus relief money that remains unallocated. Murphy took control of that money in his latest budget proposal by removing the Legislature’s role in approving the use of those funds.
Adding to the billions in unspent federal aid, New Jersey Treasurer Elizabeth Muoio told lawmakers this week that her department expects the state to collect $51.4 billion in tax revenue for the current fiscal year that ends June 30, over $9 billion more than revenue estimates certified by Murphy last July.
In a statement released Thursday, the NJBIA said it “strongly” supports the small business tax relief legislation along with a separate bill attached to it that calls for New Jersey to pay off its federal unemployment insurance loan with money from the state’s general fund.
“Not paying off this loan as soon as possible when our state is swimming in billions of surplus and federal relief aid would be akin to putting and leaving money under your mattress, instead of paying off credit card bills to avoid unnecessary and burdensome interest and fees,” Emigholz said in the statement.
The Assembly committee on Thursday also voted to advance a separate measure, A-3708, to allow businesses to continue using tents and other fixtures through the end of November 2024.
The current law authorizing those uses, which expires this November, was enacted to allow the restaurant industry and business community to continue operations amid widespread lockdowns during the pandemic.
The legislation still needs to be approved by the full state Assembly and Senate and signed by Murphy before it becomes law.
To be eligible for the credits if the bill does cross the finish line, employers would have to meet the U.S. Small Business Administration’s definition of a small business, which can vary by industry. Generally, companies with fewer than 1,500 employees or less than $40 million in yearly revenue would qualify.
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Derek Hall may be reached at email@example.com. Follow him on Twitter @dereknhall.