Much of the focus at the Legislature this week has been to put proposals in bill form and introduce them to the legislative process. Among the more noteworthy bills is one I am co-authoring (H.F. 2728) to make sure local businesses do not suffer an unnecessary tax increase at a time the state has a $7.7 billion surplus.
On March 15, business owners face a 15% or more payroll tax hike. This is due to record-setting unemployment claims that depleted Minnesota’s Unemployment Insurance Trust Fund amid the COVID-19 pandemic. The federal government provided more than $1 billion to make up for the shortfall. Now, to account for that deficit, Minnesota payroll tax rates are set to increase unless the Legislature acts.
Our businesses deserve better than to be saddled with an unnecessary tax increase at a time the state has an overabundance of tax collections. This should be one of the easiest bills we pass this session so let’s take care of this as soon as possible to protect our businesses from further damage. They’ve suffered enough the last two years and already are facing higher costs for goods and services, just like the rest of us.
The Minnesota Senate Finance Committee has unanimously approved a bipartisan unemployment insurance repayment bill. Meanwhile, House Democrats advanced a proposal on a party-line vote to repay the unemployment insurance trust fund only partially.
Under the House Democrat proposal, the UI fund would only be repaid to $0, rather than the full repayment proposed by House and Senate Republicans, as well as Gov. Tim Walz. The Department of Employment and Economic Development has confirmed that failure to fully repay the trust fund would still trigger six years of increased tax rates for businesses.
Minnesota House Democratic leadership has indicated it wants the UI tax relief to be packaged with other DFL priorities which would, at the very least, delay progress.
The UI relief should travel as its own bill. It gets risky when you start adding unrelated subjects to a bill. That’s when unnecessary delays or outright failure results and we shouldn’t take chances with this. I cannot imagine allowing this tax increase to come to fruition during a time of historic surplus and House Democrats should not flirt with disaster by holding things up.
I will keep you posted as things unfold at the Capitol. I also soon will share more about bills I am authoring this session.
Until next time, please stay in touch and let me know if there is anything I can do to help.