How Will Minimum Wage Increases Affect Taxes?

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  OCEAN COUNTY – Workers in New Jersey will eventually be making $15 an hour, but how will this affect municipal taxes in towns that employ people making minimum wage?

  The New Jersey League of Municipalities opposed the legislation because it impacted towns, which have to operate within a 2 percent cap on raising taxes. They worried that it would put towns in a difficult position: either raise fees or reduce services.

  Michael F. Cerra, assistant executive director of the league, said that municipal officials have been talking about reducing or eliminating services or reducing seasonal hires. They are more likely to increase fees than taxes.

  “Raising property taxes is always the last, worse option,” he said.

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  This is the case in Lacey, where fees for programs will go up rather than taxes, business administrator Veronica Laureigh said.

  The minimum wage increase would apply to the seasonal rate employees, she said. Full time staff is already paid more than minimum wage, so they would not be affected. A laborer starts at $19.14 and clerical staff starts at $18.95.

  To address the increase to seasonal pay, the township plans on increasing such things as summer camp registration and beach badge fees.

  “The increased program costs will cover the increased salaries. Those that use the program will offset the increase versus the property tax increase,” she said.

  In Toms River, the cost for the increase is estimated to be more than $500,000 by the time it is fully implemented, business administrator Don Guardian said. Additionally, there might be other pay increases that have to be negotiated with employees that have tenure and are in the $15 to $18 hourly range.

  Examples of workers who will be affected include beach cleaners, skating rink staff, and camp employees.

  “A township doesn’t sell cheeseburgers so we can’t simply raise the price of a burger by a $1 to make up,” he said. “I think you’ll see a slight reduction in the number of staff, additional fees for use of township property and hopefully some state funding to assist municipalities since (the state) created the additional costs. At this point in time any increase in property tax to fund the differential is not being considered.”

  For Manchester, the full time workers are already making more than what the mark-up will be this year, business administrator Donna Markulic said. For seasonal workers, there will be an increase of about $15,000 this year.

  However, when the minimum wage continues to increase, the town will have to also pay workers who have earned raises in the past so that they don’t wind up making the same as a new hire.

  “This will definitely cause a ripple effect,” Markulic said. “Our salary ordinances will need to be reviewed and each position will need to be adjusted and raised especially if it is not an entry level position. At this juncture we do not believe it will impact our tax rate significantly, but more review is warranted.”

  Originally, the law wasn’t going to impact employees. Brick business administrator Joanne Bergin said that the issue there would have been trying to fill these jobs when people could get better paying jobs elsewhere. Brick had considered increasing salaries to bring in and retain workers. When the state law changed to include towns, it gave municipalities guidelines on how to increase the salaries.

  Brick officials estimated what the impact would be to the township. This would add $24,005 this year, increasing to $73,913 in 2024. This is just an estimate, though, and only based on the number of positions. It doesn’t include extra pay that’s given for supervisors or for people who are returning for the summer.

  Most of their seasonal employees are summer hires, such as camp counselors, lifeguards, and badge checkers, she said.

  “We have modified our budget accordingly with the new legislation, but that amount doesn’t necessarily amount to one that will be the direct result of increased taxes,” she said. “We are always in the process of looking at costs we cannot change and accommodating that and also reducing where we can to keep our budget fiscally stable.”

  Prior to the minimum wage law, the Township Council increased beach fees from $5 to $8 a day. (Seasonal prices – $25 until June 15 and $30 after – didn’t change.)

  “At this time, we do not intend to further increase fees. But I could not say if that might be revisited as these costs escalate,” she said.

What Will The Increases Look Like?

  The language of the bill is as follows: “The bill provides that, except for certain workers specified by the bill, the general minimum wage rate will be increased to $10 per hour on July 1, 2019, to $11 per hour on January 1, 2020, followed by $1 increases each year until the rate reaches a level of $15.00 per hour in 2024.”

  Employers with less than six employees, or seasonal non-tipped employees, would have this instead: “The minimum wage rate will be increased to $10.30 per hour on January 1, 2020, and then increased each year from 2021 to 2025 by eighty cents, and then increased in 2026 by seventy cents so that it reaches a level of $15 per hour in 2026, followed by further increases from 2027 to 2028 as needed to have these employees provided the same minimum wage rate as the general minimum wage rate in 2028.”

  Farm laborers would have yet another rate: “the rate will be increased to $10.30 on January 1, 2020, $10.90 on January 1, 2022, and increased by eighty cents in 2023, and eighty cents in 2024 so that the rate will be $12.50.” At this time, the commissioner and the Secretary of Agriculture would evaluate to see if more increases are warranted.

  For workers who are tipped, employers will receive credit for tips against the hourly minimum wage rate the employer pays, as follows: “from January 1, 2019 to June 30, 2019, $6.72; after June 30, 2019 and before January 1, 2020, $7.37; during 2020, 2021 and 2022, $7.87; during 2023, $8.87; and during 2024 and subsequent years, $9.87.”