Employers angry over unexpected state bill

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Becky Leonard, owner of Under One Roof video store, received a bill from New York state asking her to help pay the interest on money the state had borrowed from the federal government. P-R Photo / Chris Elliott

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August 1, 2011

STEPHEN BARTLETT Press-Republican The Press Republican Mon Aug 01, 2011, 03:28 AM EDT

PLATTSBURGH — At first, Becky Brush Leonard thought she had miscalculated her quarterly taxes.

Then, the small-business owner realized she was looking at a bill from New York state, which needed help paying the interest on money it had borrowed from the federal government.

"I thought, 'I am not paying your debt,'" said Leonard, who owns and operates Under One Roof in Plattsburgh.

PASSING ON COSTS

This month, New York employers received letters from the Unemployment Insurance Division of the State Labor Department informing them they must help cover interest the state owes on federal unemployment-insurance loans.

Businesses are being assessed up to $21.25 per employee by Aug. 15 to help pay the interest the state owes the feds.

"I have never seen anything like this, and I am afraid this will set a precedent for things in the future," Leonard said.

$95 MILLION NEEDED

The Great Recession forced New York and many other states to borrow from the Unemployment Trust Fund to cover unemployment-insurance payments, and the federal government charged no interest on the loans in 2009 and 2010.

But Congress is not extending the interest-free provision further, and New York, which borrowed $3 billion in 2009 and 2010, must cough up $95 million in interest by the end of September.

The state is subsequently levying an "Interest Assessment Surcharge," which is based on a percentage of total taxable wages paid between October 2009 and September 2010.

The maximum of $21.25 per worker applies to any employee making more than $8,500 yearly. The levy applies to every employer, including non-profits and local governments.

This is impacting at least 30 states, though New Jersey lawmakers recently took action that reduced how much employers had to pay.

FACEBOOK EFFORT

Leonard has started a Facebook page called New York State Employers Livid Over Unemployment Surcharge Bill to raise awareness locally.

"I am hoping enough people will join to show lawmakers in New York this is not OK."

So far, 72 people have joined the page, and they are quite outspoken, with most criticizing the government for the bill and saying it will hurt small businesses.

Not only does it hit business owners with an unexpected bill during challenging economic times, but those commenting say it is not wise to tax small businesses while they are working to add jobs.

"So the more people I hire, the more I am charged," posted Mark Redlinski, the owner of Redlinski Meats, who got a bill for $215. "Another bright idea NY."

'SHOCKING'

The National Federation of Independent Business in New York state says its members are furious.

So is Leonard, whose Margaret Street business rents videos.

"The government passes this on to business, but I have no one to pass this to," she said. "I can't raise prices. People are struggling to get groceries and gas, and videos are not a necessity."

Business owners are real people trying to pay their bills, she said, and hitting them with an unexpected bill is tough to take. Her bill of $102.25 will not break Leonard, but she worries about the precedent it sets.

"If New York can't afford to pay the interest on the loan, how will they afford to pay the loan? What then?"

Like Leonard, Rod Conant, who owns Heritage Printing, figured he had underpaid something when he got the bill in the mail. Then he realized the state couldn't pay and decided to get the money from business owners.

"It is shocking and amazing they can do that," Conant said. "It is another New York incentive to not employ people."

Email Stephen Bartlett at: sbartlett@pressrepublican.com