The moral of the story of a merged bill backed by NJBIA this week is to offset a nearly $1 billion increase in unemployment taxes confronting New Jersey businesses.
But the subplot provision in the legislation getting less attention would actually prevent employers from facing more UI tax increases beyond that.
Bill A-3683/A-2152 (Freiman, D-16; Greenwald, D-6) was unanimously released by the Assembly Commerce and Economic Development Committee on Thursday. It provides impactful tax credits to small businesses facing a UI tax increase, as defined by the federal Small Business Administration (SBA).
But New Jersey is still paying off a $1 billion federal UI loan, which was needed when the state’s UI fund was depleted during the pandemic. It’s also continuing to draw advances from the federal UI loan.
If the state does not pay off that federal UI loan by November, it will trigger another $75 million federal tax increase on top of the current state UI increases.
A provision in the merged legislation, however, calls for New Jersey to pay off the federal loan through a new fund supported by a General Fund appropriation – which may seem more feasible with billions in surprise budget surplus announced this week.
“This is an important part of the legislation that we really thank the sponsors for, and Assembly Speaker Coughlin for posting,” NJBIA Vice President of Government Affairs Christopher Emigholz said. “When you think about New Jersey swimming in billions of surplus and federal relief aid, why would we not avoid another big tax hit and the unnecessary interest that occurs when states have federal UI loans that last too long?”
Conventional logic, however, has not necessarily been a friend to the distressing UI situation in New Jersey.
While more than 30 states have used federal recovery aid to fully or partially pay off their federal UI loans, replenish their state UI funds or ease tax increases on businesses, Gov. Phil Murphy has declined those options.
“That has been a frustration for the business community, as well as legislators on both sides of the aisle over the past year,” Emigholz said. “But the committee substitute to provide a new fund to pay off that federal UI loan is good, outside-the-box thinking that would stop New Jersey from wasting millions of taxpayer dollars on unnecessary interest and another federal tax increase.”
Emigholz is hopeful that common sense will prevail with the provision, rather than a plot twist.
“I’ve said it before, but it bears repeating: Not using any of the billions of surplus or federal relief aid to close this loan is just like keeping extra money under your mattress, but not paying off your credit cards to avoid burdensome interest and fees,” he said.
“This is something that is unnecessary and avoidable. Hopefully, our policymakers will do the right thing.”