In the fall of 2011, I received a mailing that I assumed was a check from the state of New Jersey. I receive checks from the New Jersey State Treasury when I referee fights here in the Garden State, but I hadn’t worked in awhile, so I wasn’t expecting one. After opening the parcel, I discovered that it was not a check; it was a bill from the New Jersey Department of Labor and Workforce Development Division of Employer Accounts. Wow!
The table that was below the following statements told me how much, as an employer, I owe the state.
“The New Jersey Department of Labor and Workforce Development (Department) was required to borrow funds from the United States Treasury in order to pay Unemployment Insurance benefits. Payment of the interest on the outstanding loan balance starting Jan. 1, 2011, is due Sept. 30, 2011.
As required by and N.J.S.A 43:21-14.3, the Department must assess all employers for the interest due. Each employer’s assessment amount is determined by multiplying the employer’s unemployment contributions paid and payable for the preceding calendar year (2010) by the ratio calculated in accordance with the section of the law cited above. The minimum assessment is $5.
The calculation of your Federal Loan Interest Assessment for 2011 is shown below. Payment is due 30 days from the mailing date of this notice. After 30 days, interest will accrue at the statutory rate of 15 percent per year.”
Sounds like “robbing Peter to pay Paul.” Robbing Peter to pay Paul is an English idiom referring to taking money (or other things) from one party to pay one’s debt to another. The first use of this idiom (that I was able to find) was from circa 1450 treatise known as Jacob’s Well. But I digress.
Unfortunately, this is not exactly “news.” Here is an Associated Press story dated March 27, 2009: “New Jersey is the first state to qualify for federal funds to shore up its unemployment benefits. U.S. Labor Secretary Hilda Solis announced today that New Jersey will receive nearly $207 million in federal stimulus money.
New Jersey is one of 14 states that have had to borrow from the federal government to pay unemployment claims. New Jersey began borrowing from the feds this month when the state fund ran out of money. The loan is interest-free through December 2010.”
The plot thickens.
Here’s an AP story published Jan. 25, 2010: “New Jersey Gov. Chris Christie says he’ll let a tax hike on businesses take effect if the federal government doesn’t help the state replenish the unemployment fund. Employers could see an increase of up to $1,000 per employee in their unemployment tax starting July 1 unless the fund is infused with state or federal money.” Governor Christie called for the cavalry and the cavalry arrived; however, New Jersey is not the only state to call in the cavalry.
States that have borrowed from the Fed (government, not the Reserve) in excess of $1 billion are California (no surprise, they are in for $10 billion) followed by Michigan, Pennsylvania, New York and Illinois – all having borrowed between 2 and $3 billion. So, at least, we in the Garden State are not on that list.
Meanwhile, the Obama administration is proposing waiving interest payments for two years on the $42.3 billion that states have borrowed from the federal government to cover unemployment benefits. Some 30 states are on the hook for an estimated $1.3 billion in interest charges this year.
The other two measures would directly affect the taxes employers pay to support the unemployment system. One would delay, for two years, an increase in federal unemployment taxes, which are used to pay down the principal of the loans.
The other, however, is proving to be the most controversial. It calls for increasing the level of workers’ wages subject to federal unemployment tax to $15,000 in 2014, up from $7,000 currently.
Voltaire once said: “In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other.”
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual. Randy Neumann CFP (R) is a registered representative with securities and insurance offered through LPL Financial. Member FINRA/SIPC. He can be reached at 600 East Crescent Ave., Upper Saddle River, 201-291-9000.
