NJ Should Use Fed Aid To Soften $1B Business Tax Hike, Group Says

NEW JERSEY — New Jersey should be using more of its federal coronavirus aid to help soften a massive, upcoming unemployment insurance tax hike for business owners, an advocacy group says.

Earlier this week, the New Jersey Business Coalition (NJBC), which has more than 100 member associations, sent a letter to Gov. Phil Murphy and the state Legislature. Read the full statement here.

In their letter, the coalition urged Murphy and lawmakers to use federal COVID-19 recovery money – which the state has already received – to replenish New Jersey’s Unemployment Insurance (UI) Trust Fund. It’s a move that many other states have done, the NJBC said.

The need is urgent, the group said. If something isn’t done, New Jersey employers are facing a $252 million UI tax increase in October and a nearly $1 billion increase over three years.

It’s a double whammy for many businesses, because they’re the ones who are also trying to recover jobs due to the economic crunch caused by the pandemic. But the massive windfall of federal coronavirus aid that New Jersey has been getting could help keep the wolves from the door, the coalition added.

One possible lifeline? The American Rescue Plan – President Joe Biden’s $1.9 trillion stimulus package which was passed in March.

Federal officials previously said that New Jersey will receive about $6.43 billion in state funding from the American Rescue Plan, plus another $189 million to expand its broadband internet infrastructure. An additional $1.82 billion will be split among the state's 21 county governments, and $1.74 billion divided among all 565 cities and municipalities.

The funds are supposed to be used to help keep essential workers on the job, assist struggling families and small businesses, and make “critical investments” in the nation's infrastructure. New Jersey received the eighth-largest pot of federal money compared to other states.

• See related article: See What Each NJ Town Is Getting From COVID Relief Law

It’s possible that these funds, coupled with any leftover federal aid from the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, could make a big difference for struggling businesses in the Garden State, according to the NJBC.

“Depositing some of the state’s portion of the American Rescue Plan Act funds or remaining CARES Act funds into the UI fund can help businesses invest in their company and workforce with COVID safeguards, increase wages to respond to the hiring crisis, rehire after COVID layoffs, and recover revenue lost during the pandemic,” the coalition told Murphy and state lawmakers in their letter.

“Otherwise, employers will have to divert substantial resources to cover the approximately billion-dollar UI tax increase spread over three years – despite the fact that the mass layoffs were not of their doing and only necessary due to the unprecedented pandemic and state-mandated COVID-19 restrictions on businesses,” the coalition added.

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Last winter, Murphy signed a law that would allow the estimated $1 billion tax increase to be assessed on businesses over three years. By statute, the state Department of Labor published the first phase of that tax increase, for FY22, on Aug. 13.

But the coalition noted in its letter that the law determining the tax increases in FY23 and FY24 includes an exception if the fund is in better health than the UI tax column dictated by the new law.

“Therefore, we implore you to deposit enough money in the fund by March of 2022, when the health of the fund is next assessed to reduce and/or even eliminate the potential tax increases in year two and three of the three-year phase-in.”

The groups also said the three-year tax phase-in and the March assessment are statutory constructions that can be changed by the Legislature and governor, and should not be an “excuse for inaction.”

“We request you take action now to soften the tax increase due by this October 30 for these employers who are still grappling with the lingering impacts of COVID-19 and cannot afford a tax increase on each person they employ,” they wrote.

The suggestion to use more federal aid to reduce or eliminate the massive tax increase on business has also been echoed by New Jersey lawmakers on both sides of the aisle over the past two weeks.

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