By TONY MARQUIS | Business Trends
An automatic increase in the payroll tax to replenish the state’s diminished unemployment fund is being met with resistance by organizations representing state business owners.
The governor planned to put $150 million into the fund before March 31 as well as $206.8 million from the stimulus package, but that won’t be enough to avoid a wage tax hike that would contribute about $350 million to the fund.
The fund has a built-in replenishing system that triggers a tax increase. A business with a high level of layoffs would pay more in taxes.
“They should buck up and accept the fact that now is not the time to increase taxes,” said New Jersey Taxpayers Association president Jerry Cantrell. “It sends the wrong message. I know everybody hates to pay taxes, but it almost flies in the face of logic given the circumstances.”
Since 1993, lawmakers have diverted $4.7 billion from the fund to pay for other programs. The governor put $260 million into the fund last year to avoid a payroll tax increase – the first time the state government has appropriated money to the fund in its history, according to the governor’s office.
“This conversation would not be had if $5 billion had not been siphoned from this fund for the last 20 years – in bad times and good times,” state Treasury Department spokesman Tom Vincz said.
It’s been estimated that the $350 million will cost business owners about $90 per employee when the bill is due July 1.
“This would be the worst time to take $350 million to $400 million out of the economy,” said Paul Tyahla, vice president for the Commerce and Industry Association of New Jersey. “It’s going to result in higher prices and increased pressure on salaries – all the things we’ve been trying to avoid.”
Jon Aneson has more than 50 employees at his restaurants – the Madison Pub and Café Madison in Riverside – and employs more for his design and construction company, Consolidated Building Services.
“It’s not a small tax increase,” Aneson said. “And we’ve had these concerns from years before.”
With alcohol taxes and the planned wage hike, Aneson said the restaurant business is an industry “under siege” by the state government.
In February, the state unemployment rate rose to 8.2 percent, over the national average for the first time since October 2006.
“(The governor’s) current approach is not sustainable going off into the future,” Cantrell said.
There have been weeks this year where the fund paid out more than $75 million, according to the state Department of Labor and Workforce Development.
As of March 10, the fund’s balance was not sufficient to meet the number of unemployment claims and money had to be borrowed from the federal unemployment fund.
A group of organizations, including the NJTA and CIANJ, joined the New Jersey Taxpayers Alliance to fight the governor’s budget and convince lawmakers to avoid a payroll tax increase.
“Basically is our approach is you need to cut the spending, you need to take some of the money that is going to other purposes now – including some of the education dollars by the way,” Cantrell said.
Mon, Apr 6, 2009 at 2:22 pm
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