Schumer Launches Fight to End Job-Killing Tax

U.S. Senator Charles E. Schumer announced a major effort to end a tax that small businesses would be required to pay to replenish the New York State Unemployment Insurance Fund, after Congress failed to include an extension of interest-free loans to state unemployment insurance funds in the debt ceiling compromise negotiated two weeks ago. As part of the American Recovery and Reinvestment Act, states were permitted to borrow money, interest free, from the Federal Unemployment Trust Fund (FUTF) through 2011, to help finance the state's increasing unemployment burden during the recession. New York State borrowed $3 billion to pay for their unemployment programs, but because Congress didn't extend the interest-free provision, New York State now owes the federal government $95 million in interest that is being passed on to small-businesses like American Aerogel in the form of a surcharge that could equal more than $20 per employee. Schumer is pushing legislation to retroactively extend the interest-free lending program from the FUTF, refunding fees already paid by local businesses and ending the tax.

"At a time when we need to be doing everything we can to help our businesses like American Aerogel create and retain jobs, this tax is an anchor that will only drag us down," said Schumer. "We need to free small business owners from the shackles of this fee and instead help them invest in their business to create new jobs. This is a whopping $95 million that should go to hiring more workers and reinvesting in businesses to help them grow. That's one way to get our economy back on track."

"In this challenging - and frequently changing - economy, businesses have enough to worry about without getting hit with an unexpected charge like this, yet another expense that undercuts their ability to build their businesses and create much-needed jobs," said Sandy Parker, president and CEO of the Rochester Business Alliance. "In its current fiscal situation, New York State is not in any position to absorb this cost. So we really need the federal government to look for ways to help business out on this."

This week, employers across New York were forced to pay a surcharge for each employee on the payroll in order to help the state cover its obligations in unemployment insurance. The surcharge can be as high as $21.25 per employee with the state average at approximately $18 according to the Labor Department. The state levied the surcharge to come up with the $95 million interest payment, due Sept. 30, that the federal government required after the interest-free lending program from the federal unemployment fund expired.

After the economic crisis that began in 2008, states across the country were forced to borrow money from the federal government after their own tax revenue dropped and the number of individuals receiving unemployment insurance skyrocketed. Schumer's legislation would retroactively reinstate interest free borrowing for states to help them cover their unemployment insurance obligations, and require that New York State refund the surcharge payments for small businesses that have already paid the fee.

Schumer was joined by Robert Mendenhall, V.P. of Business Development and Co-Founder of American Aerogel and Sandy Parker, President and CEO of the Rochester Business Alliance to announce his new legislation that would return $95 million in unemployment tax payments to businesses across New York.

Headquartered in Rochester since 1995, American Aerogel Corporation has been developing cost-effective methods to produce aerogels and aerogel-like materials, which are open-celled foam material that are ideal for a wide variety of applications. American Aerogel, currently has 42 employees and expects to grow to 70 employees by the end of this year, and 100 by the middle of next year. The company noted that these retroactive surcharges have made it very difficult for American Aerogel to budget and plan for the future. Unexpected charges like this bring uncertainty to the local business climate, upset the economic playing field, and dissuade innovative business like American Aerogel from investing in their business. Kodak, a major Rochester employer, was forced to pay approximately $145,000 in unemployment insurance interest taxes.

The Schumer bill would extend interest-free borrowing through 2012, and waive the interest payments from 2011, thus relieving New York small businesses of a $95 million tax. By requiring states to refund the money, Schumer's legislation would guarantee that small businesses are the ultimate savers, and would see a full refund of their surcharge payment.

"This week, small business owners are licking stamps to mail in checks to pay this painful tax, and it's leaving a bad taste in their mouth," continued Schumer. "This bill would put $95 million back where it belongs - in the accounts of small business owners who can hire new workers and drive our economic recovery."