3 New Tax Laws That Will Impact NJ Amid COVID-19 Crisis In 2021

NEW JERSEY – Gov. Murphy has signed several bills into law – including one just this week – that take effect in 2021 and may provide a boost to New Jersey as the economy continues to suffer amid the COVID crisis.

On Monday, Murphy signed a bill that will reduce the employers' payroll tax that funds unemployment insurance, saying New Jersey is continuing to look for ways to boost businesses that have been damaged by lockdowns and restrictions.

“COVID-19 continues to pose economic challenges to businesses across the state,” said Murphy. “Today’s bill signing will alleviate the financial burdens many businesses are facing and help them get back on their feet during this difficult time.”

Other tax changes will address health insurance premiums and corporations, which will no longer be free from paying a tax on companies with a net income in excess of $1 million.

These tax changes came after New Jersey raised the gas tax and the millionaire's tax in October. The latter will help balance a budget that's fraught with depleted revenues, and help boost funding for schools and related programs, Murphy said. Read more: 3 New NJ Tax Hikes Take Effect: Millionaires, Gas Tax

Here are the tax changes that took effect this week:

Reducing unemployment insurance payroll tax

Gov. Phil Murphy signed A-4853/S-3011 to reduce businesses' unemployment insurance contribution rate for a period of time. This legislation will reduce the amount of an employer’s unemployment taxes through fiscal year 2023, Murphy said.

The bill will result in cost savings to state entities, public institutions of higher education, local governments and school districts during the pandemic., Murphy said.

The short-term savings will be made possible by federal unemployment insurance advances. The recently enacted federal stimulus package extended interest-free borrowing of these loans through March 14th

As of December 17th, 20 states and Virgin Islands have availed themselves of these loans.

"The contributions New Jersey employers have made to our Unemployment Trust Fund have helped keep a record number of workers afloat during this pandemic," said Labor Commissioner Robert Asaro-Angelo. "This new law will help reduce further hardship on employers, while protecting the vital lifeline of unemployment for the future."

“Many New Jersey businesses are struggling right now, and we cannot allow them to be further penalized by a rise in Unemployment Insurance costs when layoffs were the only option for them to save their business,” said Senate President Steve Sweeney. “This law will be influential in preventing further economic damage to our businesses and communities.”

Health insurance tax

The governor signed legislation to create the New Jersey Health Insurer Assessment, which sets the rate at 2.5 percent of net written premiums and will support the state's reinsurance program and state-level subsidies in FY 2021.

The law went into effect on Jan. 1.

The legislation establishes the New Jersey Health Insurer Assessment (HIA), which is a continuation of a federal assessment on health insurance companies that was to sunset at the end of the year.

All of the revenue generated will be used to support residents and families purchasing policies on the individual market. It will allow the state to provide state-level subsidies, in addition to federal subsidies that are available, for the majority of consumers purchasing insurance on the State Based Marketplace during the ACA Open Enrollment Period.

The subsidy program will be available to New Jerseyans with annual income up to 400 percent of the Federal Poverty Level, which allows an individual earning up to $51,040, and a family of four earning up to $104,800, to qualify for the subsidy program.

The estimated average subsidy for an individual would be at least $564 a year, and at least $2,256 a year for a family of four. Actual subsidy amounts will be based on an actuarial simulation study being conducted by the Department of Banking and Insurance in order to maximize the benefit for New Jerseyans.

Corporate business tax

Murphy and lawmakers agreed to restore a 2.5 percent surtax on the Corporation Business Tax for corporations with taxable net income in excess of $1 million.

The tax was supposed to drop to 1.5 percent this year, and then it was scheduled to be eliminated by the end of 2021. Now it's extended through 2023.

The tax is expected to yield an estimated $210 million during the 2020-21 fiscal year, Murphy said.