Gov Warns of Payroll Tax Hike

Governor Christie is warning employers that an automatic payroll tax increase of about $1,000 per employee is likely hit companies, barring assistance from the federal government.

The fund is expected to be $1.6 billion in debt in March,

The newly sworn-in Republican governor said his administration will ask the federal government to forgive the debt, but he said the state can't afford to pump money into the fund to stop the tax increase. New Jersey faces a deficit of more than $9 billion for the 2011 budget year, which begins in July.

Regular blog readers know the reason for this by heart. Between 1993 and 2005 the New Jersey Legislature raided the state's Unemployment Insurance (UI) Fund by $4.7 billion. Employers contribute about 88% of the fund's total value while workers contribute the remainder through their paycheck deductions.

However, if the fund does not meet certain funding thresholds, then an automatic payroll tax hike is triggered on employers only. The legislative raids, combined with the recession, triggered a $350 million increase last year. This year's increase could be ten times higher. 

Making it more expensive to keep workers is a tough way to lower unemployment, and the state's employers may now find themselves in the position of once again, bailing out Trenton.

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