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Changes To Unemployment Schedule Will Result In A $250 Million Tax Hike For New Jersey Businesses

Aug 19, 2021

NJ CAR, and other business advocacy groups, are deeply concerned about Governor Murphy’s recently announced decision to increase the cost of unemployment benefits (by nearly 20%) on already overburdened New Jersey’s businesses, including franchised new car and truck dealerships. Not only is this bad policy, but it signifies a failure to take the necessary steps to control the high cost of doing business in New Jersey. And it doesn’t matter whether you laid off or furloughed employees during the pandemic or didn’t- EVERYONE will pay more.

The New Jersey Department of Labor recently announced the latest UI schedule for employers, which will increase the contribution rates of businesses under Column C of the UI Fund chart to replenish a fund hit hard by more than two million pandemic-related unemployment claims made since March 2020, at the start of the COVID-19 pandemic. The unemployment trust fund has paid out nearly $8 billion in the past 18 months.

The higher rate was expected to kick in July 1, but it now appears the higher tax rate will take effect October 1, 2021. And this is likely the first of three potential tax increases.  The unemployment trust fund is woefully underfunded and could have triggered a nearly $1 billion increase in employers’ unemployment payroll taxes this year. Governor Murphy signed a bill in January that phases the increased tax hike in over three years, similar to how the State dealt with the unemployment fund shortfall caused by the 2008-2009 Great Recession.

Business groups and legislators on both sides of the aisle have criticized the tax increase at a time when many businesses continue struggling to recover from the economic downturn caused by the pandemic. They say that this increase will harm job growth, when many businesses are trying to return to their pre-pandemic employment levels, and many cause more businesses to either leave New Jersey or close their doors.

Many individuals, including legislators in the Governors own party, are urging him to use part of New Jersey’s $6.2 billion in federal American Rescue Plan aid to avert the business tax hike, something other states have done successfully. It is not clear whether Governor Murphy will heed the growing chorus of voices and use federal funds to replenish the unemployment trust fund.