Jersey City's council adopted the new payroll tax on Nov. 20. Here's what you should know about the plan.

I own a house in Jersey City but do not own a business. Will my property taxes go up?

No. The payroll tax affects businesses exclusively.

I work in Jersey City but don't live there. Will more get taken out of my paycheck now?

No. The payroll tax is not like a commuter tax that hits individual workers. It is levied on businesses.

How much is the tax?

The tax amounts to 1 percent of a business' payroll. If your total payroll is $100,000 for one quarter, you will now have to pay $1,000 to the city for that quarter.

Are there any exemptions?

Yes. The wages of Jersey City residents are exempt, so a business that employs only Jersey City residents would not have to pay the tax. A business that employs two Bayonne residents and two Jersey City residents would pay the tax only on the wages of the Bayonne residents.

Mayor Steve Fulop called this a tax on corporations. Are small businesses exempt?

No. The city was not allowed to offer any exemptions except for charities and the wages of Jersey City residents.

I run a charity that employs two New York City residents. Do I have to pay the tax?

Maybe. There is an exemption in the law for charitable organizations, but if there is any business activity not related to the charity's mission, the payroll associated with that activity will be taxed. Here is how the city spokeswoman described it: "If a for-profit organization is operating within a nonprofit, or any portion of a nonprofit is operating for profit, those portions are not exempt."

This sounds complicated. Is the city going to be able to do this?

The city says it may have to hire two additional workers to keep track of the tax collection. Newark, which is the only other city in New Jersey with a payroll tax, has three people in its office of special assessments, according to Brian Platt, Jersey City's business administrator.

How much money is the tax going to generate?

State officials told the city and school district that rosy estimates are as high as $80 million annually. Newark's payroll tax brings in $50 million.

Where will the money go?

All of the money is earmarked for the public school district.

Oh, so now the public schools will have more money for new programs, improved infrastructure and updated technology?

No. State lawmakers earlier this year gave Jersey City the ability to collect a payroll tax because the state is gradually eliminating a form a state school aid that was going to bring Jersey City's school district $175 million this year. That amount is being taken away over the next seven years. The revenue from the payroll tax is supposed to offset the loss of that money. The school district is not planning any additional spending because of the payroll tax.

I own a business in Jersey City. How often do I have to report my payroll totals to the city?

Every quarter.

What is my penalty if I don't pay the tax on time?



The city can charge you 12 percent annual interest on any taxes not paid and a .05 percent monthly penalty.

When will this tax go into effect?

It's complicated. Technically, the law goes into effect 20 days after it is approved. That would make Dec. 10 the day the tax goes into effect.

But, business owners and groups that oppose the tax have threatened to block it in at least two ways. They could try to stall the tax via referendum, which means they would have to start a petition drive and collect about 6,700 signatures from Jersey City voters who want the tax rescinded. If they are successful, the tax would be put on hold and either the council could rescind the tax on its own or the question would go before voters. That was the strategy undertaken by proponents of keeping the Katyn monument at Exchange Place. A petition drive for the payroll tax would have to start during the 20-day period following adoption of the payroll tax ordinance.

Or the anti-payroll tax coalition could sue and ask a judge to put the tax on hold pending her final ruling. The group opposed to the tax have said they believe it could be unconstitutional.

An earlier version of this story should have said the ordinance goes into effect 20 days after it is approved.

Terrence T. McDonald may be reached at tmcdonald@jjournal.com. Follow him on Twitter @terrencemcd. Find The Jersey Journal on Facebook.