When the Legislature passed a law in 2018 that enabled municipalities with more than 200,000 residents to establish an employer payroll tax of up to 1%, Jersey City jumped at the chance.
It was a way to make up for cuts in state aid for education, Mayor Steve Fulop said.
Three years later, Fulop said the law isn’t strong enough — and makes collection difficult —mainly because of privacy protection concerns related to businesses.
On Monday morning, Fulop said the law needs to be updated by Trenton so the state collects the tax. He said he is working with local officials on new legislation.
On Monday afternoon, a spokesperson for Assembly Speaker Craig Coughlin (D-Woodbridge) said he’s eager to listen to suggestions.
“The speaker respects Mayor Fulop’s insight; therefore, the Assembly will thoroughly review the forthcoming legislation,” Coughlin spokesperson Kevin McArdle said.
At issue is the fact that most of the applicable information for tax collection is regularly obtained by the state through quarterly reports, such as business identification data critical for enforcement, Fulop said. But it is not shared with the city, for privacy protection reasons.
Fulop said his administration is working with local legislators to amend the payroll tax legislation at the state level to close the payment accountability loophole. He wants to have the state collect the payroll taxes directly, since the information necessary for enforcement is available to Trenton and not at the local level.
“The current payroll tax from Trenton lacks any real teeth, and so we’re forced to deploy our resources on the local level to try and enforce something that is essentially unenforceable,” Fulop said. “Without critical information from the state, the city is unable to place liens, as the number of employees working at any establishment is opaque.
“The inability to place a lien on a business that doesn’t pay means that the city can’t move forward with tax lien sales, as we would with property taxes, because nobody would ever purchase a lien to which they don’t know the value.”
Fulop said Jersey City has had nearly 3,300 businesses register with the city, but he knows it does not have every business — and feels Jersey City is losing millions of dollars because of it.
“This can be cleared up by the state easily and increase collections by more than 33% overall for next year, which would mean tens of millions of dollars more to our schools,” he said.
Assemblyman Raj Mukherji (D-Jersey City) said the tools to hold businesses accountable are not where they should be from Trenton.
“What’s the point of enabling a municipal payroll tax to fund our schools if it isn’t coupled with the tools to enforce and collect?” Mukherji said. “Moving the collection function to the state is only logical, so that employers are actually held accountable for their payroll tax obligations.”
Fulop states his case this way:
“If any homeowner defaulted on their taxes, they’d quickly be slapped with a lien, and the value of the lien would be clear to everyone, as the city and the property know what the unpaid dollar amount is,” he said. “Businesses face little to no repercussions if they evade payment on the payroll tax, because the city wasn’t provided the tools to enforce the tax with transparency.
“It needs to be fixed and can be fixed easily by Trenton.”