NJ Payroll Tax Plan: Allow Tax Hike, Then Give Credits to Some
TRENTON – Taxes that businesses pay into the unemployment fund are due to increase in July and again next summer, but the Legislature might take steps to ease that financial bite.
A bill (A3683/2152) advanced Thursday by the Assembly Commerce and Economic Development Committee wouldn’t eliminate the projected $216 million tax increase due in the fiscal year that starts in six weeks. Instead, it would provide some businesses with tax credits equal to the increase, offsetting the impact.
Assemblyman Roy Freiman, D-Somerset, said more than 70% of New Jersey businesses would benefit from the bill, which doesn’t provide the break to larger employers.
“What we’re doing here is a positive for our business community,” Freiman said. “We’re saying to them: Look, we realize that the increases that are currently scheduled will have a negative effect, and with this bill we’ll actually give them a tax credit for any of those increases that they might incur.”
Assemblyman Bob Auth, R-Bergen, said the bill is unnecessarily complicated and that some small businesses won’t have the time to bother with the credits.
“They’re just going to let it fall through the cracks. That’s not what we want to do here. You don’t want to do that here either,” Auth said. “You want to deliver immediate relief to these people. And that’s what we should be doing, so that particular aspect of this bill is flawed.”
The bill would provide tax credits that business owners could use to lower their corporate or income tax bills over the next seven years. They would be available beginning in the 2023 and 2024 tax years, based on potential increases in unemployment insurance taxes seen between July 2022 and June 2024.
The bill also puts $375 million into a fund that would be used to reimburse federal loans used to pay jobless benefits. That loan currently has no balance but more borrowing is planned – which could lead to higher federal taxes on businesses if the loan has a balance during the last seven weeks of 2022.
Business groups that have pushed for the state to use billions in federal funds to avoid payroll tax increases are backing the scaled-back alternative.
“Understanding the art of compromise, there’s no such thing as the perfect bill,” said Michael Egenton, executive vice president of the New Jersey Chamber of Commerce. “Would we have rather seen other components of it? Sure. But at the same time, this is something that is desperately needed.”
Sheila Reynertson, a senior policy analyst for New Jersey Policy Perspective, objected, saying the bill is unnecessary given the state of the economy and that the Legislature pays too much attention to businesses.
“Essentially another giveaway to cover a modest cost they are tasked with paying already and diverts resources that people, especially those that are still laid off, that they need right now,” Reynertson said.
Under the bill, the Department of Labor and Workforce Development would have to provide a minimum of 30 days’ notice to employers when the unemployment insurance tax rate will change. Last year, they were told after the increase had already kicked in – though knew more than six months earlier a hike was coming, albeit not their exact rate.
The bill now heads to the Assembly Appropriations Committee for further consideration.