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Another Voice: New York must deal with unemployment insurance crisis

Another Voice: New York must deal with unemployment insurance crisis

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A recent report from New York State Comptroller Thomas DiNapoli paints a troubling picture about New York State’s Unemployment Insurance Trust Fund. The report makes clear that employers across New York State – many of which are still struggling to recover from the impacts of the Covid-19 pandemic – are now facing a $9 billion tax increase.

As of Jan. 1, 2020, New York’s Unemployment Insurance Trust Fund was at $2.6 billion – an all-time high amount. However, according to the U.S. Department of Labor, New York was below the recommended standard for solvency. The only state that was worse off in terms of solvency was California.

Despite enduring significant job losses and an economic downtown during the Great Recession, New York was ill-prepared for another crisis. To address the trust fund shortfall, New York borrowed $11.9 billion from the federal government. As of Sept. 2, New York still owes the federal government $9 billion. The repayment of the loan balance and the requirement to replenish the trust fund will result in some businesses paying a 254% tax increase in 2025 compared to their tax payments in 2020. DiNapoli points out that the requirement to repay these loans and rebuild the fund could dampen the state’s economic recovery and hurt business growth.

For many struggling small businesses, this increase could be catastrophic. It is important to remember that no one tax, mandate or regulation exists in a bubble. Employers are challenged by New York’s harsh business climate every day. According to the Tax Foundation, New York has the third-worst tax climate for businesses. There is no doubt that a $9 billion tax hike could lead to closures and job losses at the worst possible time.

Unfortunately, when leaders in Albany had the opportunity, they did not allocate federal funds to restore the trust fund or reduce the loan balance from the federal government. Meanwhile, 32 other states are using money from the CARES Act and/or the American Rescue Plan to address unemployment insurance issues. It is not too late for our leaders to address the problem before struggling businesses are hit with this devastating tax increase.

We agree with DiNapoli’s statement in the report that state policymakers “should pursue alternatives such as additional federal support and the use of federal economic assistance to mitigate the impact on New York businesses in the midst of an uncertain economic recovery.”

Over the last 20 months, elected officials across New York have called on their constituents to do everything they can to help local businesses. We applaud them for lending their voices to struggling employers and workers during that difficult time. Now, those same hardworking New Yorkers need our leaders in Albany to rescue them from a $9 billion tax hike and replenish the trust fund in the process.

Justin Wilcox is executive director of Upstate United, a pro-business advocacy organization.

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