Upcoming Tax Cut Means Major Savings for Minnesota Businesses

As Minnesota’s economy continues to show signs of strength and growth, like recent news that our unemployment rate dropped to 4.8 percent in October, employers throughout our state are set to benefit from a new tax cut starting January 1, 2014.

Earlier this year during the 2013 legislative session, state lawmakers approved a cut to unemployment insurance taxes paid by for-profit employers. The result is over $346 million in savings for Minnesota businesses over the next two years.

It’s exactly the kind of financial jolt that will help keep our economy healthy and growing over the coming years.

Unemployment insurance taxes paid by businesses support a trust fund that provides temporary jobless benefits to workers who are laid off. During the recent recession, that trust fund went into a deficit because of larger demand for unemployment insurance benefits. In order to make up for the shortfall and make sure laid off workers could still receive income to pay their mortgage, put food on the table, and support their families, Minnesota raised the unemployment insurance tax rate and borrowed funds from the federal government.

With our state’s economy now on the upswing and new claims for unemployment insurance benefits down to their lowest level in about a decade, the trust fund is no longer running a deficit. In fact, the fund now has ample reserves, which is why we were able to reduce employers’ tax rates in the coming year.

We’re already hearing stories from businesses like Thor Construction Company, a Fridley-based firm that expects to save $500 annually per worker thanks to the tax cut.

This is great news that Democrats, Republicans, and independents can all celebrate. It’s another positive sign that Minnesota’s economy is headed in the right direction – like a few months ago when we learned our state recovered all the jobs lost during the Great Recession.

We certainly have more work to do to create good jobs that allow Minnesotans to provide for themselves and their families, but this is another step towards progress and greater prosperity for the middle class.