New Jersey businesses will see unemployment taxes fall in July

Unemployment insurance taxes paid by New Jersey businesses will decline in July, years after a surge on pandemic jobless claims drained the state fund that pays unemployment benefits and triggered a tax hike.

Rates under the unemployment insurance tax will fall to between 0.5% and 5.8% when the new fiscal year begins in July, down from between 0.6% and 6.4%, the state Department of Labor and Workforce Development announced Wednesday.

“The unemployment insurance tax reduction demonstrates a major milestone in New Jersey’s economic recovery following the COVID-19 pandemic,” Gov. Phil Murphy said in a statement. “We are now able to ease employers’ burdens while continuing to strengthen our workforce. This progress reflects our ongoing commitment to create a robust economy that supports our employees.”

In New Jersey, unemployment insurance tax rates are set by the health of the state’s unemployment insurance fund and individual businesses’ use of unemployment benefits.

The Unemployment Insurance Trust Fund’s balance sets the range for rates. Rates are higher when fund balances are low, as they were following record unemployment claims during the pandemic, and rates fall as heightened contributions refill state coffers and joblessness recedes.

Individual businesses’ use of unemployment benefits and their payments into the fund determine their tax rate within the range. Businesses that see many jobless claims will typically have higher rates than those that see few.

The department said the lower rates, which will kick in July 1, are expected to save New Jersey businesses about $300 million annually.

Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, called it welcome news for the state’s businesses.

“The estimated $300 million in savings will give many businesses a critical opportunity to reinvest in their operations, support their workforce, and strengthen their communities. At a time of continued economic uncertainty, this relief couldn’t come at a better moment for employers who are already facing significant financial pressures,” he said.

Chris Emigholz, chief government affairs officer for the New Jersey Business and Industry Association, welcomed lower rates but cautioned lawmakers against increasing other business taxes in the coming fiscal year.

“This is great news for New Jersey job creators, and it’s important that this savings that employers desperately need right now is not offset by further business tax increases,” he said.

Murphy’s proposed budget for fiscal 2026 includes higher taxes on casinos’ gambling winnings, a $2-per-truck fee on warehouses, and higher tax rates on certain property transactions above $1 million.

The decline in unemployment tax rates was unexpected. In April, Labor Commissioner Robert Asaro-Angelo told Assembly lawmakers the fund was healthy but still recovering. In responses to lawmakers, his agency said it expected unemployment insurance rates to remain static through fiscal 2027, which runs from July 1, 2026, to June 30, 2027.

At the time, the unemployment fund had a balance of $1.6 billion, and that balance was expected to rise to roughly $2 billion after tax payments from the first quarter of 2025 were collected, Asaro-Angelo said in April. Rates could be lowered because collections exceeded expectations, the agency said. The current fund balance was not immediately clear.