Posted 2/16/22

GUEST Column BY DISTRICT 54B REP. TONY JURGENS Let’s stop unnecessary tax increase on local business owners Let’s face the facts, if you’ve owned a local business over the past two years, you …

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GUEST Column


Let’s stop unnecessary tax increase on local business owners

Let’s face the facts, if you’ve owned a local business over the past two years, you have faced both economic uncertainty and hardship.

At the beginning of the COVID-19 pandemic in 2020, many – but not all – businesses were shut down by the Governor through Executive Powers. Some of these shops would inevitably close for good.

In 2021, business owners continued to suffer from rising costs of living, as prices for food, gasoline, energy and almost everything else have jumped. Some were unable to keep products on the shelves due to major delays in the supply chain. Many others were, or still are, unable to find enough workers to return their store to pre-March 2020 staffing levels.

And now, our business owners could soon be hit with a completely unnecessary tax increase, even though Minnesota has a nearly $8 billion budget surplus and nearly $1 billion in federal COVID relief money that is unspent.

Record-setting unemployment claims depleted Minnesota’s Unemployment Insurance (UI) Trust Fund at the start of the pandemic. This resulted in a debt of more than $1 billion to the federal government, which serves as the backstop when states deplete their UI funds. To make up for that loss, payroll tax rates increased on Minnesota’s business owners by 15% or more to replenish the fund.

In the Minnesota House Workforce and Business Development Policy and Finance Committee this week, a bill was heard that would allocate more than $1 billion in American Rescue Plan Act of 2021 funding to replenish the Unemployment Trust Fund. These federal funds have sat in state coffers for months, and many lawmakers would like to see it utilized to stop this tax increase on local business owners.

The bipartisan proposal supported by House Republicans, Senate Republicans, and Senate Democrats, and possibly even the Governor, would fully repay and replenish the UI Trust Fund. Yet House Democrats are pushing a bill that would only address the current deficit, and would bring the balance of the UI Trust Fund to $0, which would trigger higher base tax rates and assessments in the future until the reserve fund was fully replenished.

According to the deputy commissioner of the Minnesota Department of Employment and Economic Development (DEED), “it would take about six years for the combination of additional assessments and higher base tax rates to bring the trust fund up to the $1.3 billion level at which point those elements would be turned off. There would be several years where we expect higher tax rates.”

A six-year tax increase is not a problem we should be facing. The Minnesota Senate will be moving forward with a stand-alone UI bill in the next week or two. But House DFL leadership appears ready to play the same political game with this problem in the same way it did with the Payroll Protection Program (PPP) loan state tax exemption bill last year: hold onto it as a political bargaining chip.

On March 15th, businesses will have to pay the higher tax. If we eliminate the tax increase after that date, DEED will have to determine how to credit or refund those payments. Its deputy commissioner said in the hearing that undertaking would be “unprecedented.”

This is the sort of political nonsense that makes people hate government. All sides recognize the problem. All sides know what the solution is. Yet House leadership is pushing a bill that only partially addresses the problem and increases taxes on businesses despite having the funds to fully address the issue.

If you own a store, bar, restaurant, or any other small business in Hastings, Cottage Grove, or Afton, know that I understand the predicament you are facing. Many, if not most lawmakers on both sides of the aisle stand ready to eliminate this tax increase as soon as possible. But House Democratic leadership is not showing the urgency needed to end this tax increase, and with Governor Walz choosing not to use the power of his office to help end these political games, you are looking at a long and bumpy ride to the finish line.