ST. PAUL – State Rep. Paul Anderson, R-Starbuck, is calling on the Legislature to spare local businesses from suffering a tax increase he deems unnecessary, especially with a $7.7 billion state surplus.
On March 15, business owners could face a 15% or more payroll tax hike. Anderson said 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, like the rest of us, are paying higher costs across the board,” Anderson said. “It really would be an injustice forcing businesses to pay higher taxes because more people have been out of work during the pandemic. They’ve been through the wringer the last couple of years and we need to help them recover instead of saddling them with higher taxes.”
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 failure to fully repay the trust fund would trigger six years of increased tax rates for businesses.
Anderson also said Minnesota House Democratic leadership has indicated it wants the UI tax relief to be packaged with other DFL priorities, which he said would at the very least delay progress.
“The House majority’s bill doesn’t go far enough,” Anderson said. “It may sound like a rescue plan, but it really is a false sense of security because it will increase the tax burden for our businesses for several years. The state has more than enough revenue really fix this issue instead of going halfway and I hope we do the right thing for our businesses.”
In addition to the state’s historic surplus, the Minnesota House Workforce and Business Development Policy and Finance Committee recently heard a bill that would allocate more than $1 billion in American Rescue Plan Act of 2021 funding to replenish the unemployment fund.
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