The measure, which will be combined with parts of a similar bill, is set to be heard by an Assembly panel Thursday. (Daniella Heminghaus for New Jersey Monitor)
Assembly lawmakers are set to advance a bill to defray unemployment insurance tax hikes on businesses Thursday, their bid fueled by the state’s ample surplus cash.
The automatic tax hikes are intended to replenish New Jersey’s unemployment trust fund, which pays out benefits to laid-off workers and was drained by skyrocketing jobless claims in the earliest months of the pandemic.
Assemblyman Roy Freiman’s measure would effectively lock in the current tax rate for businesses, which is set to rise in July and again next year. Though the two rate increases will proceed, under Freiman’s bill businesses would receive credits equal to the tax hikes.
“We need a lot of steps to help around affordability for everyone, and small businesses are critical,” said Freiman (D-Somerset).
Small businesses, as defined by the U.S. Small Business Administration, are eligible for the credits. The definitions are broad and can include firms with up to 1,000 employees or millions in income, depending on the industry.
Freiman said the broad definitions would allow the bill to cover roughly 70% of New Jersey businesses.
“We’re not trying to boil the ocean on this one,” he said.
Officials from the Treasury and Office of Legislative Services said Monday New Jersey’s burgeoning cash reserves will balloon past $10 billion, the rise fueled by surging tax collections and optimistic forecasts for the coming fiscal year.
Business owners and some lawmakers had been urging the administration to use federal aid to restore the unemployment fund, but Gov. Phil Murphy has resisted the idea.
The bill will still see some changes as it absorbs a separate measure sponsored by Assembly Majority Leader Lou Greenwald (D-Camden), whose bill would have required the state to repay federal loans the state took to keep its unemployment fund solvent.
Using federal aid appears to be off the table, but transparency provisions in Greenwald’s bill are being rolled into Freiman’s, provisions that would require the Department of Labor to report information to the Legislature on unemployment loan advances, the fund’s health, and the aggregate cost of a rate change.
Freiman said the bill could end up offering grants instead of tax credits.
“I think I would still like to see more conversation around that,” he said. “Obviously, you don’t have to apply for the credits. In theory, the advantage of a grant is that it’s just coming back to you regardless, versus taxable income to utilize your credit against. But right now, to move this forward, we’re working on the tax credits.”
The merger of the bills effectively means a nascent Democratic push to use federal dollars to shore up the unemployment fund is all but dead.
When the fund drained, the business tax hikes intended to replenish it were automatically triggered, though Murphy signed a bill to spread them across three years. The first went into effect with the start of the current fiscal year in July 2021, while the two remaining hikes will come the next two Julys.
To keep the fund solvent before the tax hikes went into effect, New Jersey began taking loans from the federal government in August 2020. It’s borrowed more than $1 billion so far.
The state paid off its outstanding loan balance in early May, though it still owes nearly $6.3 million in interest.
Though Freiman is optimistic about the chances of his bill, it’s not clear whether the governor supports it. A spokesperson for the governor did not return a call seeking comment.
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