The debt ceiling compromise approved by Congress this month stuck the state with a $95 million bill for interest on a previously interest-free government loan used to pay for unemployment insurance, and business owners are being taxed to pay it.
Sen. Charles E. Schumer said he wants to stop it.
This week, he said, employers are being taxed an average of $18 per employee to cover the government's interest payment.
Schumer, a Democrat, called the surcharge a "job-killing tax" and announced Thursday at Taber Industries in North Tonawanda a bill to retroactively extend the provision that made the loan tax free, refund payments to business owners and end the tax.
While the tax won't leave employers coffers bare, it sends a message that the government does not support small businesses, and that perception could prevent companies from hiring and expanding, Schumer said.
"At a time we when we need to be doing everything we can to help our businesses like Taber Industries create and retain jobs, this tax is an anchor that will only drag us," he said.
The tax cost Taber Industries more than $20 per employee, or a total of almost $1,300. Dan Slawson, president of the company that makes precision measurement instruments, said the payments didn't "wipe us out."
But every dollar spent on the surcharge "is a dollar we cannot spend on improving our manufacturing process, hiring and improving skills or our employees and developing new innovative products," he added.
Schumer said his legislation to reinstate interest-free lending and issue refunds has bipartisan support. The provisions weren't extended, he said, because of an oversight resulting from the squabble over the debt ceiling.
"People weren't against it; they simply let it fall by the wayside as everyone was fighting," Schumer said.
The interest-free lending from the Federal Unemployment Trust Fund was part of the stimulus package offered to states during the recession to supplement their unemployment insurance programs devastated by surges in claims. New York State borrowed $3 billion from the fund to supplement its programs.