LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 723
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: FEBRUARY 15, 2023
SUMMARY
Synopsis: Creates “New Jersey Domestic Workers’ Bill of Rights Act.”
Type of Impact: Uncertain annual impacts on State revenue collections and
expenditures.
Agencies Affected: Department of the Treasury; Department of Labor and Workforce
Development.
Office of Legislative Services Estimate
Fiscal Impact Annual
State Net Revenue Impact Indeterminate
State Net Cost Impact Indeterminate
 The Office of Legislative Services (OLS) is unable to determine the direction and magnitude
of the bill’s net fiscal impact owing to uncertainty regarding the precise number of individuals
who would benefit from the enactment of the bill and their current income, employer practices,
and the countervailing effects of the bill on State revenue collections and expenditures related
to a potential increase in reported minimum wage for those individuals.
 This Legislative Fiscal Estimate only identifies the often countervailing effects of the bill is
likely to have on State government revenue collections and expenditures.
BILL DESCRIPTION
This bill creates various rights and employment protections for domestic workers.
The bill removes the exclusion of domestic workers from the Law Against Discrimination and
the New Jersey State Wage and Hour Law; requires employers to provide domestic workers with
a notification of their rights under the bill; establishes penalties for violations of its provisions,
including penalties against retaliation by the employer or hiring entity; and creates the Domestic
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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Workers Standards and Implementation Board to monitor and review the implementation of the
bill and make policy recommendations to the State regarding additional measures to be taken.
The bill defines domestic workers as hourly and salaried employees, independent contractors,
full-time and part-time individuals, and temporary individuals, each one of whom works for one
or more employers, and works in residence caring for a child; serving as a companion or caretaker
for a sick, convalescing, elderly, or disabled person; housekeeping or house cleaning; cooking;
providing food or butler service; parking cars; cleaning laundry; gardening; personal organizing;
or for any other domestic service purpose. The bill’s definition of domestic worker excludes any
individual providing care services for a family member of the individual; an individual primarily
engaged in house sitting, pet sitting, or dog walking; an individual working at a business operating
out of a residence; an individual whose primary work involves house repair or maintenance; a
home health care aide paid through Medicare or Medicaid; an individual who is a kinship legal
guardian of a child, an individual participating in the Kinship Navigator Program; and an
individual less than 18 years of age.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS is unable to determine the direction and magnitude of the bill’s net fiscal impact
owing to uncertainty regarding the precise number of individuals who would benefit from the
enactment of the bill and their current income, employer practices, and the countervailing effects
of the bill on State revenue collections and expenditures related to a potential increase in reported
minimum wage for those individuals.
State Revenues: The OLS cannot determine the net impact of a potential higher reported State
minimum wage on State revenue collections, but it expects that the net outcome will depend upon
a number of key factors, the magnitude of their individual impacts, and the extent to which the
different impacts may offset one another. These include, but are not limited to, the number of
taxpayers benefiting from an increase in income, their current income versus income reported as
required under the bill, the proportion of any income increase or decrease, job losses, and the level
of employers’ compliance with the provisions of the bill.
The OLS anticipates a State revenue gain from employees whose wages will increase to at
least the current State minimum wage per hour. These employees will have larger taxable incomes
under the gross income tax and will pay more in payroll taxes (unemployment insurance and
temporary disability and family leave insurance); and will qualify for a lower earned income tax
credit or cease being eligible altogether. The OLS also anticipates a State revenue gain in employer
payroll taxes (unemployment insurance, workers’ compensation insurance, and temporary
disability leave insurance) from employers whose employees’ wages will increase to at least the
current State minimum wage per hour.
Counteracting such gains, State revenue collections will decrease if the higher minimum wage
causes employers to: (1) reduce their demand for labor by eliminating the need for the domestic
worker or cutting hours, thereby lowering affected employees’ incomes, gross income, and payroll
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tax liabilities, and potentially increasing their earned income tax credit claims; and (2) absorb a
decrease in employers’ net income, thereby lowering their gross income tax liabilities.
Gross Income Tax: Tax data on the number of domestic workers who may be impacted by the
enactment of this bill, their current income levels, and their current State tax liabilities are not
available at the time of this Legislative Fiscal Estimate.
Gross income tax revenues would increase to the extent that certain domestic workers who
report income below the statutory minimum filing thresholds would have their income boosted
above the thresholds. In addition, revenues would also increase as complying employers withhold
taxes from domestic workers who are currently paid in cash and do not report gross income tax.
Most taxpayers become liable for New Jersey gross income tax when their gross income exceeds
$20,000, but for a single filer or a married spouse filing a separate return, the threshold is $10,000.
A taxpayer with income below the applicable minimum filing threshold does not owe tax.
For a domestic worker in the abovementioned example, the marginal tax rate of 1.75 percent
would be applied to all the additional taxable income above the statutory $20,000 income level, or
$17.50 per each $1,000 of such additional taxable income. Also, this domestic worker would pay
1.4 percent tax on all income below the $20,000 level, or $280.
For purposes of illustration, a domestic worker who is paid an hourly wage of $12.90 (worker
employed by employer with less than six employees) per hour and works 35 hours each week
during the year would have an annual gross income of approximately $23,500. Assuming this
domestic worker is a single filer who can only claim the personal exemption of $1,000, the
taxpayer’s GIT liability would approximate $210. If that domestic worker’s hourly wage is
increased to at least the State’s minimum wage of $14.13, the domestic worker’s annual gross
income would grow to $28,400, resulting in a $3,400 tax liability, a $130 difference. For every
10,000 taxpayers who meet these criteria, the State would realize a recurring gross income tax
revenue increase of $1.3 million.
The OLS further notes that the enactment of the bill may result in some job losses, to the extent
that some employees are priced out of the market, given that some employers may not be willing
to pay additional payroll taxes, sick leave, workers’ compensation insurance, or higher wages.
For purposes of illustration, in the abovementioned example for a single full-time domestic
worker earning $23,500 per year at the current minimum wage, the gross income tax collection is
approximately $210. For every 1,000 such domestic workers who lose a job due to the enactment
of the bill, the State would see a $210,000 gross income tax revenue reduction. Lastly, some
employers may choose to reduce hours of employment due to higher wages, sick leave benefits,
workers’ compensation insurance, or higher employer payroll tax contributions, resulting in some
additional State revenue losses. The OLS does not have enough information to estimate the number
of potential job losses and the total possible State tax revenue loss.
Earned Income Tax Credit: If enacted, the bill may reduce the cost of the State earned income tax
credit program, which is equal to 40 percent of the federal earned income tax credit, which
provided $657 million in estimated benefits to around 675,000 claimants in FY 2022. The earned
income tax credit is a refundable tax credit for working people with low to moderate incomes that
is administered through the gross income tax. Accordingly, any reduction in earned income tax
credit benefits will increase gross income tax collections; however, the OLS is unable to estimate
the potential annual fiscal impact of the legislation on the earned income tax credit program.
For 2022, a domestic worker employed full- or part-time would have had earned income and
adjusted gross income which must each be less than: $53,057 for a single flier (or $59,187 if
married filing jointly) with three or more qualifying dependent children – maximum NJ earned
income tax credit of $2,774; $49,399 for a single filer (or $55,529 if married filing jointly) with
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two qualifying children – maximum NJ earned income tax credit of $2,466; $43,492 for a single
filer (or $49,622 if married filing jointly) with one qualifying child – maximum NJ earned income
tax credit of $1,493; and $16,480 for a single filer (or $22,610 if married filing jointly) with no
qualifying children – maximum NJ earned income tax credit of $224. Based on the income limits
above, it is reasonable to assume that any domestic worker whose 2022 wages were $59,187 or
less was eligible for the 2022 Earned Income Tax Credits. The OLS notes that any increase in
wages which would cause a domestic worker’s total income to surpass the program’s income
eligibility, at $59,187, would result in the domestic worker no longer receiving the credit, reducing
the cost of the State earned income tax credit program reflected in increased gross income tax
revenue collections.
Payroll Taxes: The OLS notes that the bill may result in annual increases in unemployment
insurance, temporary disability, and family leave contributions from employers (employers do not
contribute to the family leave program) and employees, provided that domestic workers’ wages
increase and there are income tax increases from informal domestic workers who currently do not
report income tax.
To qualify for unemployment, temporary disability, or family leave benefits in 2023, an
applicant must earn at least $260 per week for 20 base weeks, or alternatively, earn at least
$13,000. Benefit eligibility criteria are based on the state minimum wage in effect on the date of
the Legislative Fiscal Estimate, when the minimum wage in New Jersey is $14.13 per hour for
most employees.
Unemployment Insurance Fund.
Employer Contribution: The unemployment insurance fund’s reserve ratio, in part, determines an
employer’s tax rate, which will increase as the reserve ratio falls in order to replenish the fund
balance as unemployment benefits get paid out. Currently, unemployment contribution rates for
employers in FY 2023 are set by column “D” of the Experience Rating Tax Table. The OLS notes
that it is reasonable to assume, if the enactment of the bill leads to compliance with reportable
income for some domestic workers or higher wages for others, an increase in employer
contributions to the unemployment insurance compensation fund, which magnitude the OLS
cannot determine. However, given the countervailing effects of the bill on higher income and loss
of wages or jobs, and to what extent the two effects may offset one another, the OLS cannot
determine the direction or magnitude in payroll benefits.
Employees Contribution: New Jersey is one of only three states in which employees are subject
to a tax for unemployment insurance. In New Jersey, the tax on the employee is levied at a rate of
0.3825 percent on the first $41,100 of income earned. Thus, in calendar year 2023, the maximum
employee contribution is approximately $157 per employee (0.003825 x 41,100). If the enactment
of the bill results in higher wages for some domestic workers and new reportable income for others,
it is reasonable to assume an indeterminate, likely insignificant, increase in the employee
contribution to the unemployment insurance fund. Given the regressive nature of this tax, gains
in income by the domestic worker will be partially, if not fully, offset by contributions to the
unemployment insurance fund.
Temporary Disability and Family Leave Insurance: The Department of Labor and Workforce
Development announced in October 2022 a reduction in worker contribution rates for the calendar
year 2023, with temporary disability dropping to zero percent, from .14 percent, and Family Leave
decreasing by more than half, to .06 percent, from .14 percent. The family leave program is funded
entirely through an assessment on workers’ wages, the rate of which is set by the department
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annually to cover anticipated program expenditures and a reserve requirement. The assessment
equals the rate, which is projected to generate contributions equal to 125 percent of estimated
annual family leave benefits plus 100 percent of estimated administrative costs, reduced by any
unexpended prior-year account balances. The same method is used to set the temporary disability
tax rate, except that the assessment amount for temporary disability insurance benefits is 120
percent of estimated benefits. Given the statutory funding formula for both programs, the OLS
projects an increase in the rate for both programs for calendar year 2024.
Penalty Collections: The OLS estimates that the bill may result in an indeterminate annual
increase in State revenues from penalties collected for violations established in the bill. This bill
increases existing wage and hour law penalties to employers who fail to comply with the provisions
of the bill. The OLS cannot determine the number of violations that employers may commit under
the bill and, therefore, the amount of penalty revenue that may be generated.
State Expenditures: The OLS notes that the bill may result in annually recurring State
government expenditures in a few areas: (a) means-tested government assistance programs; (b)
earned income tax credit; (c) unemployment compensation and temporary disability and family
leave insurance; and (d) State government workload.
Means-Tested Government Assistance Programs: Depending on employer responses to the
implementation of the provisions of the bill, the outlay of State government for means-tested
assistance programs, such as NJ FamilyCare, Work First New Jersey, and New Jersey Health Plan
Savings, could fall or rise. Domestic workers whose income rises as a result of the bill will,
depending on the eligibility criteria of a specific program, either cease being eligible for benefits
or qualify for reduced benefits. Offsetting the State cost savings from the reduced reliance on
means-tested assistance programs by individuals with higher incomes, the State may see an
increase in program participation from individuals who cannot secure employment because of any
reduction in the supply of jobs and work hours attributable to the potential of loss of jobs or loss
of income. The OLS, however, has no information on which it could base an estimate of the
countervailing cost effects on means-tested assistance programs, and to what extent the two effects
may offset one another.
Earned Income Tax Credit: To the extent that the bill result in gross income tax increases from
informal domestic workers who currently do not report income tax, the OLS notes that these
workers may become eligible for the earned income tax credit.
Payroll Benefits: The bill allows an eligible domestic worker to benefit from unemployment
insurance and workers compensation and temporary disability and family leave insurance. Given
the countervailing effects of the bill on higher income and loss of wages or jobs, and to what extent
the two effects may offset one another, the OLS cannot determine the direction or magnitude in
payroll benefits.
State Government Workload: The bill may increase the annual operating expenses of the
Department of Labor and Workforce Development. The extent to which the increased
responsibilities will add to the department’s annual expenditures will depend on the operational
decisions the department will make in response thereto. The bill furthermore requires that the
department to establish the Domestic Workers Standards and Implementation Board to monitor
and review the implementation of the bill and make policy recommendations to the State regarding
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additional measures to be taken. The OLS, however, does not have full information to predict the
department’s operational responses to the bill.
The OLS notes that