NJ Businesses Getting a $380 Million Tax Break
- May 26, 2016
- Gary Bingel
New Jersey businesses got some more good news on May 11 after Governor Chris Christie added another $180 million to his April announcement of $200 million in payroll tax relief. This represents the largest cut to unemployment business taxes in modern NJ history. Effective July 1, this should equate to a $100 break per employee for businesses.
The tax relief will come from the NJ Unemployment Trust Fund, which currently has a $1.8 billion surplus. However, that wasn’t always the case. From 1992 through 2005, various lawmakers and administrations used the fund to plug more than $4.5 billion in other budgetary shortfalls.
This left the fund far too depleted to cover a huge jump in the state’s unemployment rate to 10% during the Great Recession. Ultimately, New Jersey had to increase its payroll tax as well as borrow more than $2 billion from the federal government to meet the state’s unemployment claims. (30 other states had done likewise.)
Thankfully, a pair of initiatives changed the tide. First, NJ voters approved a 2010 measure protecting the unemployment trust fund against future raids in Trenton. Second, anti-fraud efforts by the Department of Labor and Workforce Development yielded $800 million in unemployment savings. This enabled the state’s unemployment trust fund to return to solvency in 2014, 2 years ahead of schedule. Combine that with far fewer New Jerseyans collecting unemployment, and the once-daunting deficit became a healthy surplus.
This is especially welcome news for New Jersey businesses that are currently facing potential legislation requiring paid sick leave and increasing the minimum wage.
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Gary Bingel, Partner-in-Charge of the National State and Local Tax Group, with expertise focuses on state and local income taxation, and sales and use tax consulting. He has significant experience serving clients in the manufacturing, retail, pharmaceutical, biotechnology, technology and service industries.
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