Jersey City Mayor Calls On Trenton To Fix Payroll Tax Law

JERSEY CITY, NJ — Jersey City Mayor Steven Fulop is calling on state legislators to fix the state payroll tax law.

The city depends on the law to partially fund the school district, which experienced deep cuts in state aid. The law lets municipalities with over 200,000 residents form an employer payroll tax of up to 1 percent, which Jersey City implemented once the law was passed in 2018.

The issue is that the city doesn't have the tools to enforce the law on the local level, Fulop said. Nearly 3,300 businesses have registered with the city. The ordinance requires every employer to register even if they are not subject to the tax, but the city has no official recourse to enforce the law.

“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,” said Fulop. “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. This can be cleared up by the State easily and increase collections by more than 33 percent overall for next year, which would mean tens of millions of dollars more to our schools.”

The city just passed an $814 million school budget that would raise taxes for homeowners by $1,000. The tax increase was proposed and passed as the way to implement a fully funded budget after the state cut funding to Jersey City schools by $152 million this year.

“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?” said Assemblyman Raj Mukherji. “Moving the collection function to the State is only logical so that employers are actually held accountable for their payroll tax obligations.”

The city created its own internal audit team paid for by local funds, which increased efforts to collect taxes and penalties owed by making direct contact with businesses citywide by sending out deficiency letters, site visits, and phone calls to each individual business owner. But Fulop said that's not enough and a bigger change needs to come from the state level.

"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," Fulop 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."

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