Assembly passes bill to offset unemployment tax hike for businesses

By: - June 17, 2022 7:13 am

The New Jersey Business and Industry Association estimates the next unemployment insurance tax hike will cost businesses a total of roughly $300 million in the next fiscal year. (Photo by Eduardo Munoz Alvarez/Getty Images)

New Jersey businesses would be spared two upcoming unemployment insurance tax hikes under legislation passed unanimously by the Assembly Thursday.

The bill (A3683) would award corporate business tax and gross income tax credits to businesses that haven’t used other grants to offset the tax increases. It would also expand eligibility to employers not typically recognized by the federal government as small businesses, like those in the hospitality industry.

After millions of jobless claims during the pandemic depleted the state’s unemployment fund that pays out claims, an automatic tax hike was triggered to replenish it. The New Jersey Business and Industry Association estimates the next hike will cost businesses a total of roughly $300 million in the next fiscal year, which begins on July 1.

Assemblyman Roy Freiman (D-Somerset), the bill’s chief sponsor, has characterized the bill as a sustainable approach to replenish the unemployment fund and help businesses that have struggled since the pandemic led to widespread business closures and restrictions.

Freiman added the bill would help pay back a $1.1 billion federal loan the state took out to help pay jobless claims during the pandemic. If the loan isn’t paid back by November, another $75 million federal tax increase will be automatically triggered, on top of any state increases.

“The benefit is it’s a tax relief for our employers — a huge swath of our employers. We’re going about it in a smart way, and we’re going to help the economy recover,” said Freiman.

He said roughly 70% of businesses could see some form of relief from the bill because of its broad language.

Dozens of other states opted to use federal coronavirus relief dollars to boost their unemployment funds. How much employers pay into it is based on the fund’s balance and how many of their workers claimed benefits.

Gov. Phil Murphy’s administration declined to use federal aid to shore up the fund, but along with lawmakers, spread the automatic tax hike over three years to avoid socking businesses with it all at once. The first hike went into effect in November 2021.

Overall, the tax hike is expected to bring $885 million into the fund, labor officials have said.

Businesses recognized by the U.S. Small Business Administration as small businesses would be eligible for the credits, and those can include companies with up to 1,000 employees, depending on the industry. Typically, hospitality businesses and seasonal employers are excluded, but the legislation includes specific language to help them.

Business groups celebrated the measure moving forward and called on the Senate to post the bill ahead of the summer recess. The bill has not yet been heard in the chamber’s labor committee.

“In addition to providing businesses much-needed tax relief, paying off that federal loan will prevent New Jersey from wasting taxpayer dollars on unnecessary interest,” said Chris Emigholz, vice president of government affairs for the New Jersey Business and Industry Association. “That’s the responsible thing to do for New Jersey.”  

Progressive groups have criticized this bill as a corporate tax giveaway — they note businesses were eligible for federal loans and other state aid to keep them afloat during the pandemic — and said the money would be better spent helping vulnerable populations previously excluded from coronavirus relief.

The bill would also require labor officials to provide a 30-day notice to employers when the unemployment insurance rate changes.

The state is still sitting on more than $3 billion in federal coronavirus relief money that hasn’t been allocated. Murphy has not released a plan on what he plans to do with the billions, but the governor can appropriate up to $10 million without legislative approval.

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Sophie Nieto-Munoz
Sophie Nieto-Munoz

Sophie Nieto-Muñoz, a New Jersey native and former Trenton statehouse reporter for, shined a spotlight on the state’s crumbling unemployment system and won several awards for investigative reporting from the New Jersey Press Association. She was a finalist for the Livingston Award for Young Journalists for her report on PetSmart's grooming practices, which was also recognized by the New York Press Club. Sophie speaks Spanish and is proud to connect to the Latinx community through her reporting.