House Democrats are holding relief hostage as MN businesses brace for potential tax hikes
During the pandemic, numerous Minnesotans lost their jobs for pandemic-related reasons. Because of that, the unemployment insurance trust fund was depleted. Minnesota had to borrow from the federal government. That debt currently stands at nearly $1.3 billion and has accrued about $9.4 million in interest.
The time has come for the state of Minnesota to pay back that loan. If the Minnesota state government does not pay back the loan and refill the trust fund by March 15, businesses will see their unemployment insurance taxes go up. Businesses have already been notified of these scheduled tax hikes.
Generally, there has been a lot of consensus around the need to repay the debt so that businesses won’t have to face tax hikes. This is why it’s surprising that nothing has been done yet, considering efforts to repay the debt started in the last session.
MN Democrats are holding business relief hostage
More than two weeks ago, the Minnesota Senate passed Bill SF 2677 that would ensure that the debt will be paid before automatic tax hikes kick in. And even Governor Tim Walz’s supplemental budget includes a $2.7 billion spending plan to get rid of the debt.
The problem is that most House Democrats are unwilling to offer tax relief to large, profitable businesses, and instead want to see smaller targeted relief. Therefore, Bill SF 2677, which was passed in the Senate to address the debt, is in limbo in the House. Similarly, numerous other bills introduced in the House to address the debt haven’t gone anywhere. Moreover, Democrats claim that they want to tie the unemployment insurance trust fund to a bill that will increase the payments to essential workers from $250 million to $1 billion.
Businesses in Minnesota, however, are bracing for a potential tax hike that would prove even more detrimental as they recover from the pandemic. According to the Pioneer Press, some businesses are expecting to pay tens of thousands more in unemployment insurance if this debt is not squared up. Not to mention that would take exceedingly long for the debt to be financed by tax hikes alone, which would further depress growth and job creation.
Businesses statewide have already been notified of what new tax rates would look like should the federal debt not be repaid by March 15. Steve Grove, commissioner of the state’s employment and economic development agency, told a House workforce and business development committee on Monday that it would take employers about a decade of payroll tax payments to replenish the trust fund.
Kristin Gruhot of D & E Excavating in Marshall said her business would see a $26,000 increase in addition to $109,000 in unemployment insurance taxes the company paid last year, and Rebekah Hagstrom of Liberty Classical Academy — a K-12 Christian school in White Bear Lake — said their increase would cut into funding that could be used for supplies or a part-time teacher’s salary.
Inaction is unjustifiable
It would be preferable to use unspent federal funds to pay the debt as most states have done. But any policy action that refills the unemployment insurance trust fund is definitely better than anything that will let businesses — big or small — face tax hikes.
Refilling the fund is not a tax cut. It merely prevents businesses from facing tax hikes due to pandemic-related events. In fact, a significant cause of unemployment during the pandemic has been government policy itself. Passing a bill that repays this loan is in no way, shape, or form a corporate handout.
The MN House Democrats need to put politics aside and pass Bill SF 2677, which would repay the loan and refill the unemployment insurance trust fund. This is a crucial time for Minnesota businesses. And tax hikes would only derail employment and job recovery.