The state Senate Labor Committee Thursday unanimously moved a bill that would give businesses across New Jersey three years of predictability in the payment of unemployment taxes.
The bill, which was passed by the full Assembly on Monday, allows businesses to space out an upcoming tax increase, paying it over three years.
The scheduled increase in the tax paid by business is the result of the unemployment fund’s insolvency. High unemployment and the diversion of $4.6 billion in fund surpluses over the past 20 years to the state’s general fund have left the unemployment insurance trust fund with no money.
To pay out claims, the state has borrowed $2 billion from the federal government – money that must be repaid with interest. To pay back the loan, the unemployment tax would shift this year to its highest rate, tacking on an estimated average payment of $300 per employee.
S2730 will instead raise the tax incrementally, one level on the five tiered system per year, finally settling at the highest rate in 2014. The shift means the average tax hike in the current year will amount to about $100 per employee.
“We all recognized that this was a problem and we all recognized the need to step up and pay back the debt,” said Melanie Willoughby, senior vice president of the New Jersey Business and Industry Association.
Diane Walsh of the Commerce and Industry Association of New Jersey called the potential tax hike due this summer “crippling” and said it would trigger more layoffs among state businesses and deter others from opening up shop in the state.
“This legislation averts the crisis and instead establishes a graduated schedule of increases, coupled with critical reforms, to restore the financial stability of the unemployment insurance fund.
Also included in the legislation is a provision that would lend stability to the unemployment insurance system by building up reserves and lessening fluctuations in the tax rate.
The legislation is the result of recommendations made by a 12-member task force made up of legislators, union leaders and business groups convened in 2010.
The state’s business community has come out in full force to support the measure, with representatives of the NJBIA, the New Jersey Chamber of Commerce, the Commerce and industry Association of New Jersey and the National Federation of Independent Business testifying in favor.