NJ State Director Publishes Op-Ed Warning of Large Hike in Employer UI Taxes

Date: November 02, 2020

Suggests CARES Act funds be used to prevent those increases on small businesses

NFIB’s New Jersey State Director, Eileen Kean, wrote the following op-ed that was published on Oct. 27 in the Star Ledger and on NJ.com. We wanted to share the content of this opinion with you as we advocate for our members by working against an increase in employer UI taxes:

A Looming Tax Hike for Small Business as the Recovery Slows

By Star-Ledger Guest Columnist

By Eileen Kean

This has been a very difficult year for most small businesses, especially restaurants, bars, and amusements, and those offering events or travel services. Many were able to get by for a while with help from the Paycheck Protection Program and keep workers on the payroll but almost all businesses have already spent those federal loan dollars. Now, COVID-19 is still with us, many state restrictions remain in place, and customers are still wary about venturing out. This has created intense fiscal pressure on small business owners, who also recently learned they face a major hike in unemployment insurance taxes.

The huge amount of unemployment benefits paid out during the pandemic in New Jersey depleted the state’s Unemployment Trust Fund at record speed. Our state and others are now borrowing from the U.S. Treasury so the unemployed can still receive checks. As a result, the Office of Legislative Services recently estimated that New Jersey’s employer payroll taxes, which go up when the fund drops, would have to increase by almost a billion dollars next year. That office says the tax, which is a percentage of payroll, would rise from 0.7% to 1.1%.

To better understand the impact of that tax increase on small businesses, we consulted an expert at Strategic Services on Unemployment and Workers’ Compensation. The average cost of the per-employee tax will increase by about $280 a year. For example, if you own a New Jersey construction company with 60 employees, the yearly unemployment tax goes up by around $16,800. That is significant, especially now. And, when you consider restaurants that were shuttered for months and continue to face capacity limits, such a tax hike could be a killer.

The economic situation for Main Street is already dire. Half of the small business owners surveyed by NFIB say they can’t get by the next six months without additional financial support, and 21% say they will have to lay off employees. We have already seen permanent closures and there could be many more in certain sectors.

This economic uncertainty also impacts workers, half of whom work for small businesses in New Jersey. If our state can prevent small businesses from rising costs it will also preserve jobs.

One solution is to allocate state CARES Act funding to replenish the Unemployment Trust Fund. A recent audit of that federal block grant shows Governor Murphy had not spent a significant portion of those funds. The money was expressly intended to help people, businesses, and local governments impacted by the pandemic. More than a dozen other states led by Democrat and Republican governors have already used some of those CARES dollars to buttress state Unemployment Trust Funds, sparing small businesses that cost.

If small business owners can just get through the pandemic and remain afloat, and if they are spared higher taxes, they are bound to play a significant role in New Jersey’s economic revival.

Eileen Kean is the state director of the National Federation of Independent Businesses (NFIB) in New Jersey, an association that represents thousands of members in the state.

 

Related Content: Small Business News | New Jersey

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