Employers and unions sue Jersey City over new payroll tax Employers and unions sue Jersey City over new payroll tax

Employers and unions sue Jersey City over new payroll tax
21 Dec 2018

US real-estate developer Mack-Cali and some of its subsidiaries are suing the state of New Jersey and Jersey City over the city’s new payroll tax, claiming it is vague, slapdash and unconstitutional.

The payroll tax was adopted last month by the City Council to help fund its schools. But the plaintiffs, which include two trade unions and the locally-created Exchange Place special improvement district, believe that it represents unfair taxation. They also attest that the ordinance adopted by the Council has “overreaching provisions” and the city’s booming economy shows it does not need to collect extra taxes to fund schools, according to NJ.com.

Mack-Cali chief executive Mike DeMarco said in a statement: “The payroll tax will decimate Jersey City businesses, small and large. It will harm cash-strapped non-profit organisations and will undo the progress that the community has made in Jersey City over the last 20 years."

The plaintiffs are also asking that a judge bar Jersey City from collecting the payroll tax until the case is heard. It was planning to do so from 1 January. The tax amounts to 1% of an employer’s total payroll, and is paid by the business itself rather than its workers.

For years, Newark was the only municipality in New Jersey that operated a payroll tax, but this summer state lawmakers approved the controversial legislation allowing Jersey City to collect one too. Revenue from the tax is intended to offset school funding cuts, which are expected to come gradually over the next seven years.

State law allowed Jersey City to exempt the wages of local workers from the tax, which the plaintiffs say represents unfair taxation and is barred by the New Jersey Constitution. They also argue that the tax law is so broadly written that it includes people who are not legally classed as employees, such as independent contractors.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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US real-estate developer Mack-Cali and some of its subsidiaries are suing the state of New Jersey and Jersey City over the city’s new payroll tax, claiming it is vague, slapdash and unconstitutional.

The payroll tax was adopted last month by the City Council to help fund its schools. But the plaintiffs, which include two trade unions and the locally-created Exchange Place special improvement district, believe that it represents unfair taxation. They also attest that the ordinance adopted by the Council has “overreaching provisions” and the city’s booming economy shows it does not need to collect extra taxes to fund schools, according to NJ.com.

Mack-Cali chief executive Mike DeMarco said in a statement: “The payroll tax will decimate Jersey City businesses, small and large. It will harm cash-strapped non-profit organisations and will undo the progress that the community has made in Jersey City over the last 20 years."

The plaintiffs are also asking that a judge bar Jersey City from collecting the payroll tax until the case is heard. It was planning to do so from 1 January. The tax amounts to 1% of an employer’s total payroll, and is paid by the business itself rather than its workers.

For years, Newark was the only municipality in New Jersey that operated a payroll tax, but this summer state lawmakers approved the controversial legislation allowing Jersey City to collect one too. Revenue from the tax is intended to offset school funding cuts, which are expected to come gradually over the next seven years.

State law allowed Jersey City to exempt the wages of local workers from the tax, which the plaintiffs say represents unfair taxation and is barred by the New Jersey Constitution. They also argue that the tax law is so broadly written that it includes people who are not legally classed as employees, such as independent contractors.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER STORIES THAT MAY INTEREST YOU

New York introduces payroll tax system to bypass federal tax reform

Brazil reintroduces unpopular payroll tax

Victoria slashes regional payroll tax in half

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