West OC Times

WASHINGTON, D.C. - With states like California and New York currently delinquent in repaying loans borrowed from the federal Unemployment Trust Fund (UTF), Rep. Michelle Steel (R-CA) and Rep. Claudia Tenney (R-NY) introduced legislation to protect small businesses from tax hikes caused by blue-state governors’ fiscal mismanagement.

Employers pay a 6% federal unemployment tax (FUTA) on the first $7,000 paid annually to each employee. States with no outstanding federal loans may credit up to 5.4% of state unemployment taxes paid against the 6% tax rate, meaning the minimum net FUTA tax rate is 0.6% for employers in states with no outstanding unemployment loans. However, employers in states with outstanding federal loans for two or more consecutive years face incremental FUTA tax credit reductions for each additional year that the state’s balance is not repaid in full.

The Protecting Small Businesses from Imposed Tax Hikes Act would prevent further unemployment tax hikes for small businesses in states that have mismanaged their unemployment insurance programs, saving job creators from an undue tax burden that is directly attributable to state government debt delinquency.

“Small businesses in California face a suffocating business climate due to crippling inflation, rising taxes, and a reckless state government that is addicted to borrowing and spending. My legislation would save our job creators from repeated tax increases caused by Governor Newsom’s failure to responsibly pay back federal unemployment insurance loans,” said Rep. Steel, a member of the House Ways & Means Committee. “I’m pleased to have Rep. Tenney join me in this effort to save small businesses in California and New York from suffering even more consequences from job-killing policies enacted by liberal governors.”

Under Governor Newsom’s leadership, California is responsible for a massive outstanding loan balance of $18.3 billion, while New York currently owes $5.7 billion according to the U.S. Treasury Department.

"New York is one of only two states with outstanding loans from the unemployment insurance trust fund. It's disgraceful that Albany Democrats and Governor Kathy Hochul chose not to repay this debt, instead forcing small businesses to cover the cost amid record inflation and rising living expenses," said Congresswoman Tenney." As a former small business owner, I understand the challenges of New York’s high taxes and burdensome regulatory policies." The Protect Small Businesses from Imposed Tax Hikes Act ensures that Hochul's financial mismanagement does not burden small businesses and hardworking families."

The full text of the legislation can be viewed here.

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Background

Since taking office, Rep. Steel has sounded the alarm on issues with state unemployment programs, including questioning billions in fraudulent claims paid out as part of pandemic relief and proposing solutions for recouping improper payments.

May 20, 2024 – Steel, Ways & Means Chair Smith call on Department of Labor (DOL) Acting Secretary Julie Su to detail any attempt to “forgive” or write off fraudulent unemployment insurance (UI) payments issued by California or any other state.

December 18, 2023 – Steel urges Governor Gavin Newsom to prioritize repayment of federal loans provided to replenish California’s UI Trust Fund.

May 11, 2023 – Steel-cosponsored measure to recoup $400 billion in fraudulent unemployment payments by incentivizing states to pursue investigations to recover stolen funds passes U.S. House.

July 9, 2021 – Steel calls on U.S. Department of Labor IG conduct an official audit uncover extent fraud COVID-related UI programs.

June 29 ,2021 –Steel leads bipartisan effort recoup billions pandemic unemployment fraud introducing H.R .4190 require states recover funds prevent fraud support victims identity theft.

May19 ,2021–Steel joins House leadership introducing Combatting COVID Unemployment Fraud Actof2021(H.R .3268), which requires increased identity eligibility verification incentivizes states recover fraudulent funds granted.

February5 ,2021–Upon entering office ,Steel questions Newsom about audit findings$11billion fraudulent unemployment insurance claims billions under investigation.

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