New Jersey businesses will see their taxes drop by about $48 per employee this summer.
Governor Christie announced Tuesday that after running a deficit for several years, the account that pays unemployment claims is now well into the black. Christie said the roughly $1 billion balance in the fund will trigger about $200 million in cuts to the state unemployment insurance tax on businesses. That means the average business, which has paid about $700 a year per employee into the fund, will pay about $652 a year for each worker, the administration said — the first such tax cut since 1998.
“Our job is to make it easier and more affordable to live and to work here, not more expensive and burdensome,” Christie said at a news conference at the Jersey City corporate office of J.P. Morgan Chase & Co., the banking giant awarded $412 million in tax credits by the state to move here from New York City. Christie added that the business tax reduction “allows the folks on both sides – the employer and the employee – to keep more of their money.”
New Jersey isn't used to having so much money in the trust fund. By 2009, about $4.6 billion in taxes that were supposed to be paid into the fund had been was diverted for over two decades to pay for other “unauthorized” projects and to plug the budget, Christie said. Those diversions drained the fund and, with no money, forced the state to borrow from the federal government to pay out unemployment claims. The state paid back about $109 million in interest alone for the borrowing, labor commissioner Harold Wirths said. The fund’s deficit peaked at $2.1 billion. The state raised the tax, and employers were hit with tax increases at “the absolute worst time,” Wirths said, when the recession sent the unemployment rate to near 10 percent.
But after reforms to prevent diversion and a series of anti-fraud measures, the fund went into the black in 2014, two years ahead of schedule, according to the governor’s office. Now it is anticipated to surpass $1 billion in the next several weeks, Wirths said.
The bulk of the fund is supported by the unemployment tax on businesses; a smaller portion comes from a tax on employees. The unemployment tax cut for businesses is expected to take effect July 1, the governor’s office said.
“The employers suffered all the consequences of the raiding of this trust fund. All the folks that did nothing wrong other than pay their bills suffered the consequences, in 2010, of the raids,” Wirths said.
In 2010, Christie's first year in office, voters approved a constitutional amendment banning lawmakers and governors from diverting money from the fund. The labor department also launched a series of anti-fraud measures, such as cross-checking a national directory of new hires, using Internet provider information to track fraudulent claims from overseas, and ensuring inmates at county jails aren't filing claims. Nearly $800 million has been saved in those efforts, Wirths said.
Tom Bracken, chief executive of the New Jersey Chamber of Commerce, called the tax cut a “win for everyone in New Jersey.”
“This positive development means employers will pay less into the fund and will instead invest more in their businesses and in New Jersey's economic growth,” Bracken said in a statement.