Small business support in governor's State of the State

ALBANY, N.Y. (NEXSTAR) — Small businesses across New York face ongoing financial pressure. Although Gov. Kathy Hochul proposed ways to foster a more affordable and competitive atmosphere for small businesses in her State of the State address, she nonetheless got pushback for not doing enough for local business communities.

She suggested more low-interest loans through the Linked Deposit Program and a new Low Interest Capital initiative, or LINC. For small startups, the Companies Attracting Talent to Advance Leading Innovations and Scale Technologies in New York program—CATALIST NY—would offer tax incentives to ease hiring costs. Hochul also plans to fund training on new technologies, including artificial intelligence, for entrepreneurs.

During the State of the State address, Hochul counted over a million new businesses and 740,000 private sector jobs since she took office.

To support businesses that employ parents, the state would create a substitute pool for childcare providers, so parents are less likely to miss work. Other proposals included climate grants for eco-friendly upgrades and new disaster recovery tax credits to help businesses during emergencies. Hochul also pledged to make it easier for small businesses—especially minority- and women-owned business enterprises—to compete for government contracts.

The National Federation of Independent Business (NFIB), representing over 11,000 small business owners statewide, welcomes some of the governor's proposals, like cutting personal income taxes. That would let small businesses that pay taxes through personal income get some relief. But the NFIB asked for more to address business tax rates and a regulatory environment that hurts small businesses.

According to NFIB New York Director Ashley Ranslow, rising costs—including utility bills and lawsuits—crush small business. Expensive regulations and high unemployment insurance debt left over from the pandemic compound the issue. Businesses often pass rising costs on to consumers, creating a cycle of financial strain.

Ranslow said that lowering taxes and cutting red tape would help both businesses and consumers. "If you have a low number of employees, 10 to 15, you're not going to qualify for tax credits or grants [offered by Empire State Development]," she said. "It's tough sledding."

These obstacles contribute to capital flight, with businesses relocating to more business-friendly states, according to NFIB. State Sen. Dean Murray—the ranking Republican on the Senate Committee on Small Business—agreed: "[An unfriendly business environment] is the reason we see more and more people leaving."

NFIB counted over 500,000 small businesses across the state employing 3 million people with 3% to 5% profit margins. And, "What they're bringing in, they're pouring back out," Ranslow added.

Paying into New York's unemployment insurance trust fund, representing $6 billion in debt from the pandemic, costs small business like so:

• State tax per employee: $250
• Federal penalty per employee: $105
• Surcharge: $15 per employee

That $6 billion in unemployment debt is owed to the federal government for COVID-era loans taken to handle surging claims after businesses shut down. Some 37 states have paid off this debt, with some using federal relief to address it. New York's approach led to higher state tax debts for businesses, according to the NFIB, creating major stresses across industries until it's paid off.

“The Unemployment Insurance Fund issue has been hanging over New York’s business community like a dark cloud. Talk to any business owner or organization, and it’s among their top concerns. It’s disappointing that such a major expense wasn’t brought up in the governor’s address, but hopefully information is presented in her budget address next week," said Republican Assembly Leader Will Barclay. "The goal coming out of the pandemic should have been to create a better business climate than what existed before. That hasn’t happened.”

To replenish the UI fund and pay down the debt, the NFIB supports using state budget funds, instead. "New York wasn't alone in having to borrow money," Ranslow said. "But New York has not used any sort of public dollars to pay off its debt."

Ranslow said that small businesses also risk lawsuits and expensive settlements over minor violations like an inaccessible website, Americans with Disabilities Act noncompliance, or mistakenly paying bi-weekly instead of weekly. The NFIB wants the state to find a way to reduce such lawsuits and stop any new “private rights of action” that let employees sue, exploiting and potentially bankrupting businesses even if they've been fully paid.

Business owners face uncertain footing in a landscape with shifting regulations. Since 2021, New York implemented dozens of new laws, taxes, and regulations on small business struggling to stay afloat without the legal or financial resources to manage these changes.

"Every time we pass [regulatory] legislation, we put blinders on. 'Well, it's not that big of a deal in this one area,'" Ranslow said. "When you pass seven to 10 bills, that's an additional hurdle or burden. It has an aggregating effect when you do it year after year after year. And small businesses don't have human resources. They don't have lawyers. They're often doing this on their own."

The NFIB wants the state to lower credit card swipe fees, for example, which cost businesses millions each year. They also pushed for tax reform, because New York is one of the least affordable states for small businesses.

State energy policy also poses a financial risk—upgrades are expensive. The NFIB warned that New York's electrification targets—including those in the Department of Environmental Conservation's Advanced Clean Trucks program, requiring vehicle manufacturers to sell more zero-emissions vehicles—drives higher energy costs and supply chain disruptions. The state lacks the infrastructure to support such large-scale shifts, with small businesses footing the bill.

The Business Council of New York shared similar concerns. They liked Hochul's workforce development and affordable childcare proposals, but called for the government to bring more relief to businesses.

Because small businesses—independently owned and operated companies with no more than 100 workers—employ almost 40% of New York’s private-sector workforce, their issues impact statewide economics. As lawmakers consider the governor’s agenda, both groups want the state to embrace a more pro-business approach.

"The business community, particularly our small employers across the state and consumers, need relief from policies that increase the costs of doing business and living in New York," said Heather Mulligan, the president and CEO of the Business Council of New York. "We are hopeful the governor and legislature understand that message.”

So far in the 2025 Legislative Session, two bills already proposed could handle some of these issues:

• S1487 gradually lowers taxes on small business income over several years, and makes more businesses—like sole proprietorships and corporations with incomes under certain thresholds—eligible for tax breaks
• S1638 or the New York Business Emergency Relief Act of 2025, uses state surplus and settlement funds to pay off federal unemployment insurance debt

Both of these were also proposed last year. On both sides of the aisle, several other bills proposed during the last session similarly stalled in committee and could resurface:

• S869 makes new business regulations less burdensome by requiring the repeal or amendment of existing rules to offset costs for businesses when new rules are introduced
• S2594A requires clear terms and a five-day window to cancel consumer litigation funding contracts—an agreement for a company gives financial aid to someone involved in a lawsuit in exchange for a cut of the settlement—and makes funding companies register and list such agreements in lawsuits
• S3495 makes the Property Tax Rebate program permanent
• S4064/A4168 encourages small-scale manufacturing by creating a 0% state income tax rate for qualified pass-through manufacturers
• S4146B/A7655B or the Consumer Litigation Funding Act requires consumer litigation funding companies to follow strict and transparent rules about contracts, disclosure, licensing, fees, and attorney conduct
• S4801/A2747 or the Affordable NY Act lowers some property and income taxes and doubles the STAR benefit
• S6593/A6068 repays federal unemployment insurance debt with unused state funds and future settlement money instead of businesses taxes
• S7973 requires credit card fees to leave state or local taxes out of fee calculation, with card providers having to adjust fees or refund the tax portion
• S7999/A8859 repeals part 581-D of New York's labor laws, which makes employers pay an interest surcharge on federal unemployment advances
• S8413A/A8981A makes setting up or encouraging a fake construction site accident for insurance fraud a felony
• S9623/A10423 raises the limit for certain state purchases without a competitive bidding process to $1 million for small businesses
• S9811 changes how liquidated damages are calculated for late wage payments, increasing penalties and limiting damages based on interest rates

"We need to do a better job, and I didn't hear enough in the State of the State," said Murray, who backed several proposals above. "Our goal is to help businesses to succeed so they can grow. When they succeed, they create more opportunities, more jobs."