New Jersesy Tax Credits May Offset Increases

By Bob Pepalis | The Center Square contributor, The Center Square New Jersey

June 5, 2022

(The Center Square) – Tax increases made to generate $1 billion in revenue to replenish the New Jersey’s Unemployment Insurance Trust Fund, which was depleted during the pandemic, may be offset to a degree by tax credits.

Democratic state Assembly members Roy Freiman, Lou Greenwald and Chris Tully sponsored a bill, A-3683, to provide corporate business tax and gross income tax credits for small businesses that did not offset the increases with subsidies or other grants.

“Instead of funding the deficit in the Unemployment Trust Fund, the compromise is to offer tax credits on expected increases in an employer’s unemployment insurance contributions,” Eileen Kean, state director for New Jersey of the National Federation of Independent Business told The Center Square.

If the fund had been replenished, the small-business employers would not have seen a tax increase, she said. Instead, tax credits would be available if the legislation is enacted. The businesses would have to file paperwork to receive them.

“Clearly, we welcome this as a solution as a compromise," Kean said. "Because in the end, it will put money back into a small business's pockets. And this is a priority for NFIB in New Jersey to offer relief to small businesses, so they don't get slammed on their contributions to the UI fund.”

"A formula the state uses to calculate business contributions to the UI fund triggered the automatic tax increases," Christopher Emigholz of the New Jersey Business and Industry Association told NJ Advance Media.

"More than 70% of state businesses would get help in paying for the scheduled unemployment tax increases," Freiman said, according to NJ.com. The state Department of Labor would be required to give employers at least 30 days' notice when the unemployment insurance rate will change.
Kean said she was at the Assembly Commerce and Economic Development Committee hearing and testified on this legislation. Republican legislators asked if small businesses would prefer if the fund was replenished or if they’d prefer the tax credit.

“The devil’s in the details and as long as small businesses are being recognized because the fund is going to be replenished, and they're not going to be slammed to pay the full billion dollars themselves, we will take this as a victory,” she said.

"Republican lawmakers urged Murphy to use federal coronavirus aid from the American Rescue Plan to replenish the UI fund," NJ.com reported.

"The Assembly is working on the tax credit legislation, but it has not been negotiated with the Senate yet," Kean said.

“The important issue is to offer relief to all employees or small employers by replenishing the UI fund or offering a tax credit,” she said.

If the legislature fails to either replenish the UI fund or offer tax credits to offset the tax increase, the $1 billion will fall on state employers over the next three years.

“If neither of these is done, come July of 2022 and July of 2023, all small businesses in New Jersey are going to see their payments to unemployment go through the roof,” Kean said.

"That would be bad politically," she said. The majority party “sees the writing on the wall” and is working to fix this because when the pandemic started, it was understood that this would not be put on the shoulders of employers because they didn’t create this problem.

“The way things are set up right now, it doesn't matter if you laid anybody off or not, your rates are still going to go through the roof,” she said.

"More than 30 other states already have done this," Kean said.

The focus of the work of The Center Square New Jersey is state and local-level government and economic reporting that approaches stories with a taxpayer sensibility.