Policymakers Avoid $1 Billion Tax Increase on
Employers Set to Take Effect July 1

Legislators voted June 29 to avoid imposing an automatic $1 billion increase in Unemployment Insurance (UI) payroll taxes, limiting the increase this year and making important reforms in eligibility for benefits.

Both the Senate and Assembly voted to uphold Governor Chris Christie's conditional veto of S-1813 (Madden, Sweeney)/A-2624 (Egan, Albano), thereby limiting this year's increase to an average of $130 per employee instead of $400 per employee. If lawmakers had not upheld the conditional veto, the full $1 billion tax increase would have taken effect automatically, costing employers an average of $400 more per employee, while some companies could have been hit with increases as high as $1,000 per employee. Christie signed the bill into law on June 30.

The threat of a $1 billion tax increase came from the fact that the UI fund is insolvent and has been borrowing money from the federal government to pay benefits since March 2009. Furthermore, by approving the conditional veto, lawmakers will help return the fund to solvency more quickly by making it harder for those fired for misconduct to qualify for unemployment benefits, and prohibiting those fired for severe misconduct from collecting UI benefits altogether. This will save employers an estimated $175 million annually. For more information, contact Dominick DiRocco.