A UI tax increase is the last thing Main Street enterprises need as they struggle to rebuild
ST. PAUL, MN., Dec. 6, 2021—The representative association for Minnesota’s small businesses today called on legislators to freeze state unemployment insurance (UI) taxes at current levels for 2022, and to commit remaining federal COVID-19 relief funds and state surplus money to restoring the UI Trust Fund (UITF) reserve.
“Minnesota’s small businesses are currently facing numerous economic headwinds, including supply chain issues, inflation, worker shortages, and lingering effects from the pandemic,” said John Reynolds, Minnesota state director for the National Federation of Independent Business (NFIB), the nation’s largest small-business association. “The last thing small businesses need right now is a significant tax increase.”
Minnesota’s UITF reserve was quickly depleted in 2020 by a surge in unemployment claims as a result of the COVID-19 pandemic and related mitigation policies. The state began borrowing money from the federal government to cover claims in July 2020 and is currently $1.06 billion in debt. The UITF reserve requirement exceeds $1.5 billion.
“Minnesota saw an unprecedented surge in workers filing for unemployment as a result of the pandemic and state-imposed mitigation policies,” said Reynolds. “Many small businesses were forced to close or significantly curtail operations through no fault of their own. Our UI system was not built for this type of event.”
State UI payroll taxes increase when the UITF is below the federally required reserve. The federal UI payroll tax also escalates, and an interest surcharge is attached to employers’ UI tax bills while the system is in debt. Without intervention, the debt will remain outstanding for several years. Payroll taxes that fund the UI system fall entirely on the employer side.
“With tax increases set to go into effect on January 1, 2022, now is the time for lawmakers to step up, pay off this debt, and begin rebuilding the reserve,” said Michael Flynn, a small business owner in Southeastern Minnesota and an NFIB member. “Minnesota should follow the bipartisan lead of 31 other states that have used federal COVID-19 relief funds to aid small businesses instead of laying the entire $2.6 billion burden on Minnesota employers.”
Minnesota holds approximately $1.1 billion in unspent federal pandemic relief funds from the American Rescue Plan Act of 2021. The state budget reserve contains approximately $1.8 billion. In the first quarter of Fiscal Year 2022, state general fund receipts exceeded projections by over $650 million.
Related News Releases
- November 24–Minnesota Lawmakers call for UI payroll tax relief
- November 16–Minnesota Employers Likely to See Significant UI Tax Increase
Keep up with the latest on Minnesota small-business news at www.nfib.com/minnesota and by following NFIB Minnesota on Twitter @NFIB_MN.
For 78 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-driven association. Since its founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.
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