Congresswoman Claudia Tenney (NY-24) has introduced a new bill aimed at protecting small businesses from rising federal unemployment taxes. The Protecting Small Businesses from Imposed Tax Hikes Act, co-sponsored by Congressman Lloyd Smucker (PA-11), seeks to prevent tax increases on employers in states that have failed to repay their federal Unemployment Insurance (UI) loans.
The bill addresses a key concern for businesses in states like New York, which still carries outstanding UI debt. Under current law, states with unpaid federal UI loans for two or more consecutive years face automatic increases in the Federal Unemployment Tax Act (FUTA) rate. This could result in small businesses paying more in unemployment taxes due to decisions made by state policymakers.
Tenney, a former small business owner, criticized New York’s handling of the unemployment insurance trust fund. “Due to Governor Hochul’s inaction and financial mismanagement, the burden of repaying these federal UI loans will fall heavily on our state’s small businesses,” she said. “Small businesses should not be further penalized because of Governor Hochul’s irresponsibility.”
The FUTA tax is typically 6.0% on the first $7,000 in wages paid per employee, with employers able to offset most of that through state UI tax credits. However, for states that have not repaid their federal UI debts, that credit is reduced by 0.3% annually, leading to an increase in costs for businesses.
Smucker echoed Tenney’s concerns, arguing that small businesses should not be forced to compensate for state mismanagement. “States who mismanage their unemployment funds should be responsible for their own debts and should not turn to small businesses to make up the difference,” he said.
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