As of August 31, 2022, New York State owes $7.8 billion to the federal unemployment trust fund. The unemployment trust fund pays benefits, funded by a payroll tax on all for-profit businesses in New York State.
The COVID-19 pandemic created a significant rise in unemployment claims for which the state unemployment trust fund did not have sufficient funds to pay out. In turn, the federal government loaned the state $10 billion to make those payments.
New York State has not fully paid the debt back despite overachieving revenue streams and the infusion of federal money in response to the pandemic. The failure to remit that payment caused an interest payment due to the federal government for $160 million, and that interest payment is due September 30, 2022.
New York’s businesses continue to struggle under high taxes and operate in one of the most regulatory restrictive states in the nation. New York has the third worst business tax climate in the country, only ahead of New Jersey and California.
Despite these unfriendly business conditions, the state is passing onto businesses an interest assessment surcharge, or IAS, to pay this interest payment, further deteriorating the already lousy business climate in New York State.
Businesses are receiving notices that they must pay IAS of $27 per employee, which is a payment adjusted annually until the state’s debt is completely retired.
The state mandated the layoffs and received federal aid to help address the impacts of the pandemic. The state needs to pay its debt without a burden to the business community.
Businesses continue to struggle coming out of the pandemic coupled with inflationary cost increases and labor shortages which are driving consumer price increases.
The state could use revenue streams that have produced unanticipated income such as sales tax or like over 30 other states, use a portion of the federal Covid relief money to meet its own obligation.