Businesses in Jersey City can expect to pay a 1 percent tax on the payroll of out-of-town employees starting Jan. 1 thanks to an ordinance approved by the Jersey City Council on Nov. 20. Mayor Steve Fulop is expected to sign the measure.

The vote followed a public hearing that stretched late into the night. NJBIA joined several business groups testifying against the measure.

“The cumulative impact of this payroll tax proposal on the heels of the state’s recent enactment of a corporation business tax surcharge and new labor and energy mandates will have an adverse impact on our job-creators,” NJBIA Vice President Andrew Musick testified. “These aggregate costs will directly impact employers of all sizes in Jersey City.”

The move is designed to make up for lost revenue under a new school funding law. Municipalities are generally not authorized to impose payroll taxes, but Governor Murphy and the Legislature enacted a law this summer making an exception for Jersey City. Newark is the only other municipality that can tax payrolls.

NJBIA has worked with the Partnership for Jersey City, a diverse coalition with representatives from business, unions and a number of trade associations all opposed to the employer payroll tax. It also organized a grassroots campaign encouraging local businesses to contact council members.

The reason the association lobbied so hard on a local issue is the impact it will have on competitiveness and affordability.

“Many companies courted by Jersey City have moved across the Hudson River from New York and have made significant capital investments, including adding thousands of new employees,” Musick explained. “This payroll tax will effectively chip away at the competitive advantage Jersey City has established, as a lower cost alternative to surrounding states and specifically, New York City. In short, a payroll tax would make Jersey City less competitive.”