Starting July 1, New Jersey businesses will pay less in unemployment insurance taxes, thanks to a stronger job market and a rebound in the state’s unemployment trust fund.
State labor officials say the upcoming tax cut will save employers about $300 million over the next fiscal year. The reduction comes as the fund, which pays benefits to laid-off workers, reaches a healthier financial position.
New Jersey ties employer tax rates to the overall condition of the unemployment fund. When the fund struggles, rates climb. When the balance improves, rates drop. Employee contributions stay the same, but employers see their rates shift each year based on the fund’s numbers.
This year, the numbers landed in the green.
During the early days of the pandemic, record-breaking job losses drained the fund. The state borrowed from the federal government to keep checks going out. Business owners braced for a wave of tax hikes.
Lawmakers responded in 2021 by spreading those increases out over time. That phased approach gave the fund room to recover without crushing employers all at once. Three years later, the plan appears to have worked.
The Department of Labor and Workforce Development confirmed the upcoming tax cut on Wednesday. Officials credited a steady climb in employer contributions, along with stronger tax revenue overall. Through May, income tax collections were up 10% compared to last year, according to Treasury data.
The state’s unemployment rate has also held steady, staying below 5% since the start of the year. Fewer claims mean less strain on the trust fund — and more room to reduce what businesses owe.
Gov. Phil Murphy backed the move, calling it a sign of long-term recovery. He stood firm in earlier years against using federal pandemic aid to plug the fund. Instead, his administration focused on repayment and slow rebuilding.
Now, businesses will see the result of that decision. The lower rates take effect July 1, just as the new fiscal year begins. Employers will see the changes reflected in their quarterly filings.
Labor officials will continue tracking the fund. If growth holds, more adjustments could follow.
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.