NJ Considering Legislation to Help Address Unemployment Insurance Fund
As New Jersey addresses a budget this year with a nearly $10 billion surplus, 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. 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. Businesses are confronting about $250 million in added taxes this fiscal year and an additional $600 million or more over the next two years.
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. A bill, A-3683, sponsored by Democratic state Assembly members Roy Freiman, Lou 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.
Republican 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.
The State’s business community 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.
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.