New York small businesses face steep unemployment tax hikes amid ongoing debt crisis

In a recent New York legislative budget hearing, significant concerns were raised regarding the impact of unemployment insurance debt on small businesses and families across the state. As New York approaches five years of outstanding debt related to unemployment insurance, the potential doubling of the Federal Unemployment Tax Act (FUTA) offset rate poses a serious financial burden for local businesses. Currently at 1.2%, this rate is set to increase to 2.3% next year if the debt remains unresolved, translating to an additional $105 per employee in federal UI taxes. This increase comes on top of already high state UI tax brackets, which average an extra $250 per employee annually.

The hearing highlighted that many small businesses are struggling to cope with these rising costs, which stem from state policy decisions made during the pandemic. Unlike over 30 other states that utilized COVID relief funds to alleviate unemployment insurance issues, New York has not taken similar measures, leaving businesses to shoulder the financial burden. This situation not only affects business operations but also restricts the state’s ability to increase weekly unemployment benefits for workers, as federal regulations tie benefit adjustments to the state’s outstanding debt.

In addition to unemployment insurance concerns, discussions also touched on the governor's proposals for child tax credits. Critics pointed out that under the current proposal, 86% of children would only see a modest increase of $170, which many argue is insufficient to address the needs of families struggling with poverty. The potential expiration of enhanced federal child tax credits could further exacerbate child poverty rates in New York, which are already among the highest in the nation.

The hearing underscored the urgent need for legislative action to resolve these issues. Addressing the unemployment insurance debt is seen as a critical step not only for supporting small businesses but also for improving the overall economic health of the state. As lawmakers consider the budget, the discussions reflect a broader commitment to ensuring that both businesses and families receive the support they need to thrive in New York.