BLOOMBERG NEWS

NY Budget Negotiators Weigh Unemployment Tax Cut for Businesses

By Zach Williams | March 31, 2025

New York businesses appear likely to get some relief from unemployment taxes in the state budget being negotiated by Gov. Kathy Hochul (D), the state Senate, and Assembly.

The amount of the decrease depends on how the Democratic officials approach repaying $6.5 billion to the federal government for pandemic-era assistance.

Businesses and labor unions want Albany leaders to pay the full amount, which was borrowed during the Covid-19 pandemic to shore up the state’s unemployment system. Lawmakers could then boost individual benefits and reduce taxes on businesses by roughly $300 per employee.

The Assembly endorsed that approach, while the governor and Senate have proposed covering only this year’s interest payment of approximately $165 million, which would likely save businesses about $15 per worker. The Senate also floated a tax break for small businesses.

The proposals, which could aid workers and companies in a potential downturn, are part of negotiations over a spending plan that is likely to exceed $252 billion. The deadline is Tuesday, though lawmakers are slated to pass an extension to give them more time.

“Every dollar that’s spent on increased unemployment taxes is a dollar that we’re unable to reinvest in our business, whether we’re talking about wages, or hiring, or expanding, or upgrading our stores,” Mona Golub, a spokesperson for Northeast Grocery Inc., which operates 210 stores employing 21,000 people statewide, said in an interview.

Relief Sought From Extra Fees

New York has imposed additional charges on businesses to pay back the billions it borrowed from the federal government. Only New York and California haven’t reimbursed the government for the assistance.

Businesses paid roughly $320 extra per employee because of the debt in 2024 though the exact amount depends on the size of the business and other factors, according to the National Federation of Independent Business, a Tennessee-based group that advocates for small businesses nationally.

The state Department of Labor last year charged employers about $215 per worker to cover the interest and principal of the debt alongside other costs for the unemployment program, according to the Business Council of New York State. Another $105 per employee went to the IRS as a penalty for the debt, which the state expects to pay off by the end of the decade.

Paying off the full balance would save businesses the full amount of extra charges, while covering only the interest would save about $15.

Costing Businesses and Workers

Businesses that had no employees on unemployment during the pandemic chafe at their increased costs to help the state pay back the federal loan, especially considering the relatively high expense of operating a business in New York compared with other states.

“It’s the accumulation of everything that makes doing business in New York so frustrating,” Rod Dion, owner of Tech Valley Office Interiors, which employs 13 people near Albany, said in an interview. “I never laid off anybody in 2020.”

Workers are also paying a price, according to the New York State AFL-CIO, because the state can’t legally increase unemployment benefits from its current $504 per week until it pays off the debt.

“Our priority is to ensure that unemployed workers can make ends meet if they lose their job through no fault of their own,” Mario Cilento, president of the labor federation’s state affiliate, said. “Had the statutory increases occurred, it would be approximately $850 per week.”

‘Trying to Find Something’

Hochul and the state Senate want to allocate up to $250 million to cover interest on the debt. The Assembly wants to take $7 billion from state reserves to pay off the full balance so that unemployment benefits can increase.

“Governor Hochul continues to negotiate in good faith with the Senate and Assembly,” Hochul spokesperson Kassandra White said in a statement.

The Senate also proposed a tax credit for businesses with 50 or fewer employees to cover increased costs associated with the unpaid debt.

“We should clear that up,” Assembly Speaker Carl Heastie (D) said of the debt at a March 27 press conference. “We are years behind where the benefit should be for employees who apply for unemployment.”

Hochul, Heastie, and State Senate Majority Leader Andrea Stewart-Cousins (D) are negotiating the matter alongside proposals that would ban smartphones in schools, restrict masks in public, give prosecutors more leeway with criminal discovery, and loosen standards for involuntarily committing people to mental health treatment.

“We’re all trying to find something that we can do to help businesses with their UI expense,” Stewart-Cousins said at a March 26 press conference. “That is a conversation that’s ongoing.”