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2021 will be a year worth forgetting for Maryland small businesses. The National Federation of Independent Business’s Uncertainty Index for the last three months shows an increasing number of business owners are not very hopeful about the future. No doubt much of this unease is attributable to the discord in Washington, where Congress and the White House are perpetually gridlocked. It is anyone’s guess on the outcome of the Biden Administration’s Build Back Better Act, which threatens the economic success of our Main Street businesses with increased taxes and fines on small employers. But the worries don’t stop there. Inflation, supply chain issues and a tight labor market are also causing small business owners to wonder if 2022 will put more distance between them and the economic upheaval brought on by COVID-19. Small businesses, the heartbeat of our nation’s economy and communities, suffered disproportionately during this crisis.
In Annapolis, the General Assembly and Governor Larry Hogan’s Administration provided some much-needed relief for small businesses during the 2021 legislative session. The RELIEF Act, targeted tax credits, and funding for the state’s beleaguered Unemployment Insurance Trust Fund went a long way in helping Main Street weather the pandemic. But while Maryland ranks 8 th for its health metrics in a recent WalletHub study on states recovering from COVID-19, it ranks 37th for the economy and labor market. So as legislators head back to the house and senate chambers for their annual legislative session, studies like these offer a stark reminder that Maryland still carries a reputation as not being business-friendly.
There will be a variety of issues important to small businesses this coming year. Some of them will have an immediate impact on their bottom line and others will set them up for future success – or failure. Below are issues NFIB will watch closely during the 90-day legislative session.
Paid family leave
Big Labor has long pushed for a state-run paid leave insurance program. Last year’s bill called for 12 weeks of leave paid for by employee and employer contributions into a fund administered by the Division of Unemployment Insurance. Any employer with at least one worker would be required to participate. The startup cost alone was estimated at more than $20 million. Based on last year’s Social Security wage base, employers would contribute a maximum of $536 per employee.
To say such a program is unaffordable for Maryland’s small businesses is putting it mildly. The fact is our job creators work with their employees to provide benefits, not just those related to time off, that are fair and equitable for everyone. A one-size-fits-all mandate like this doesn’t work for small business or their employees.
Unemployment insurance
The state’s Unemployment Insurance Trust Fund (UITF) faced unprecedented stress during the pandemic. The record number of claims from 2020-2021 caused employers’ UI taxes to sky-rocket, with some seeing 400-600% increases on tax bills during the first quarter of last year. The table of UI tax rates jumped from A (the lowest) to F (the highest) in 2021. Thankfully, NFIB with the help of legislative leaders and the Hogan Administration got legislation passed to lower employer rates to Table C in 2022 and 2023.
However, the relief may be short-lived as some policymakers are likely to seek an increase to the weekly benefit amount that claimants can receive. Increasing the amount would not be wise on the heels of an economic crisis that depleted the UITF at a rate never seen before. Such a move would exacerbate the Trust Fund’s solvency crisis. Remember, only employers contribute to the UITF in Maryland. Other states like New Jersey include worker contributions into their funds. It’d be a very tall order to increase payouts while asking small businesses to foot the bill.
Minimum wage
It was less than three years ago that the General Assembly passed a statewide $15 minimum wage over the objections of small businesses. Our members fought hard to show the compounding effects the move would have on their ability to run a business. Ultimately, the legislature pushed forward with the ill-advised proposal. Despite our objections to the bill overall, legislators acknowledged some concerns from the business community by adding amendments. Namely, allowing businesses with 14 or fewer employees more time to ramp up to $15.
Now, some legislators want to alter this compromise by speeding up the phase-in. The idea presumably developed in response to Gov. Hogan’s effort last June to withdraw Maryland from the Federal Pandemic Unemployment Compensation (FPUC) program, despite the issues being unrelated. The FPUC provided UI claimants an extra $300 benefit per week.
In fact, small businesses are already voluntarily raising compensation to attract and retain talent. NFIB’s November jobs report showed a net 44% of owners increasing compensation, a 48-year record high. Arbitrarily raising the state’s minimum wage faster than what our members planned for and at a time when many are already doing so will only hurt our smallest businesses. Particularly in industries like retail and hospitality that were devastated by the pandemic.
Maryland sits on a “historic” general fund surplus. This session, NFIB will work with any legislator willing to improve Maryland’s business climate by investing this surplus responsibly and wisely to help our small businesses and communities, not create unfunded mandates and grow the size of government.
Mike O’Halloran is the director of the Maryland chapter of the National Federation of Independent Businesses.
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This article is featured in The Daily Record's Eye on Annapolis Summit magazine that was inserted with the Wednesday, January 12, 2022 issue of The Daily Record.
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