Less than two weeks into office, Gov. Chris Christie seems poised to break his signature campaign promise to cut taxes for all taxpayers — instead agreeing to raise taxes for all businesses and workers. This is unacceptable. The chronic anemia that has plagued the state unemployment fund was highlighted in former Gov. Jon S. Corzine’s transition report four years ago. Economic conditions have worsened the situation. According to Christie, the unemployment insurance, or UI, fund will be $1.6 billion in the red by March. Business taxes are automatically increased when the fund’s balance goes below a certain level as measured every March.
Yet despite the downturn in employment, the real reason the fund is in such a precarious position is because our Legislature has used these funds to pay for pet projects. Since 1992, approximately $4.8 billion has been diverted by the Legislature for other purposes.
Despite this evidence of government incompetence, Christie now feels that he is justified in levying a tax on employers of up to $1,000 per employee to replenish the fund. He claims his hands are tied and that he has no power to stop the tax.
This is simply not the case. There are solutions to this problem.
First, the fund must be managed better and funds previously taken by the Legislature replaced by transferring cash from other agencies such as the $1 million Corzine left behind in the governor’s office operating budget or the millions of dollars in fines and fees taken by the Department of Environmental Protection from businesses and property owners.
Numerous state agencies fly under the radar with carryover fund balances that add up to more than $1 billion. This money could be used to replenish the unemployment fund and avoid this job-killing tax increase.
That a state with an unemployment rate of 10 percent — far from exceptional by long-term historical standards — has nearly depleted its funds suggests serious mismanagement. Before any increase in taxes or seeking a federal bailout, a full review of the existing system should be conducted to determine where the problems lie.
New Jersey’s unemployment insurance program is out of alignment with most other states and is therefore more expensive.
New Jersey’s definition of an employer (anyone who paid an employee $1,000 or more in a year) is below the federal standard ($1,500/year) and therefore traps small businesses in the program’s web of taxes.
New Jersey’s taxable wage base for the UI program is the second highest in the country.
New Jersey’s UI tax has more noninsurance and administrative surcharges than any other state. These include the Medical Malpractice Liability Insurance Premium Assistance Fund, the Supplemental Workforce Fund for Basic Skills, the Surcharge for Catastrophic Illness in Children, and the Workforce Development Partnership Tax.
New Jersey has some of the highest weekly benefit amounts in the country.
Most states have a one-week waiting period for benefits. New Jersey does not.
New Jersey’s dependent allowances are generous compared to most states.
These are just some of the issues that need to be addressed in a wholesale reform of New Jersey’s unemployment insurance program.
Without these reforms, using reserve carryover funds locked away in other agencies will only be a temporary solution, no more effective than any one shot gimmick.
Allowing this tax hike lessens the pressure to cut spending in other areas. New Jersey needs to live within its means. This includes reforming a system that has been a slush fund for legislative raids and is too generous and, in a vicious cycle, creates more of the problem it is trying to alleviate. Ironically, the looming tax hike will drive many businesses out of existence and relegate even more workers to the unemployment line.
Taxpayers cannot afford to have their new governor let this happen. He can, and must, stop this tax hike. NJN
Steve Lonegan, who was a candidate for the Republican nomination for New Jersey Governor in 2005 and 2009, is the state director of Americans for Prosperity, NJ.