Minnesota businesses wait to pay tax hike as deadline looms

(FOX 9) - Most Minnesota business owners are waiting until the last possible minute to pay a large payroll tax increase triggered when state lawmakers could not agree to a fix.

About 130,000 businesses owe between $350 million and $400 million, but less than half of them have submitted their paperwork, and fewer yet have actually paid the tax, according to Minnesota economic development officials. April 30 is the deadline to submit payments for the first quarter of 2021.

Gov. Tim Walz blistered lawmakers in both parties Wednesday for inaction, calling it "absolutely ridiculous" that lawmakers have not agreed to avoid the taxes or provide bonuses for workers who were on the front lines of the COVID-19 pandemic.

"This should’ve been the easiest deal in Minnesota political history," Walz said during a media event at a Minneapolis grocery store.

State law requires the tax increase whenever Minnesota's unemployment insurance fund falls below a certain level of reserves. Minnesota economic development officials estimate that $2.74 billion is needed: $1.44 billion to repay a debt to the federal government for a bailout during the pandemic, and $1.3 billion to restock the reserves and flip the tax trigger back off.

About 100 business leaders fanned out across the state Capitol on Wednesday, pressuring lawmakers to refill the unemployment fund.

"Minnesota is an outlier state. It needs to be competitive," Minnesota Chamber of Commerce President Doug Loon told reporters. "If we don’t fix this, Minnesota businesses are at a disadvantage."

But nine days before the tax deadline, there are few signs of an imminent deal. While Walz and Senate Republicans have called for the full $2.74 billion amount, House Democrats support $1.8 billion, which would repay the debt yet provide a smaller cushion of reserves.

House DFL leaders say the Legislature could also change state law to blink off the tax increase despite the smaller cushion.

"It’s kind of crazy that the Senate Republicans are so willing to dish out $2.7 billion, which we don’t need to, to businesses to freeze unemployment insurance tax rates but they’re unwilling to provide less than half that to the workers who kept us going through COVID-19," House Speaker Melissa Hortman, DFL-Brooklyn Park, told reporters Thursday.

Walz's economic development officials and Senate Republicans have long said that the full amount is what's required to wipe away the tax increase. Loon said he hadn't seen the $1.8 billion proposal but is interested in any legislation that avoids a tax increase.

The legislative session must end May 23. Walz vowed not to call lawmakers back for a special session if they can't strike deals on this or a variety of other issues before then.

"There is no special session," he said. "Do your work. Get it done."