Washington — As if small businesses needed another reason not to hire, consider their latest financial burden: The cost of rising unemployment itself.
Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It’s forcing higher state taxes on companies to pay for unemployment insurance claims.
Some employers say the extra costs make them less likely to hire. That could be a worrisome sign for the economic recovery, because small businesses create about 60 percent of new jobs. Other employers say they’ll cut or freeze pay.
Bruce Meyer, a University of Chicago economics professor, said his studies show that higher unemployment taxes usually lead to lower pay for employees.
Behind the trend are widespread layoffs. The number of people claiming jobless aid has tripled since the recession began. The demand has drained the funds that many states use to pay jobless claims. Nearly half the states are borrowing from the federal government.
Now the bills are coming due. States reset their unemployment insurance taxes at the end of each year, and 33 states will raise them next year, according to the National Association of State Workforce Agencies. The states’ tax revenue in the last fiscal year fell $42 billion short of what’s needed for unemployment aid.
Most of the tax increases are being triggered by laws requiring higher taxes to make up for a decline in state funds to pay for benefits. In some cases, cuts in jobless aid are required, too.
Florida’s minimum unemployment tax, for instance, will skyrocket next year to $100.30 per employee from $8.40. The maximum will rise to $459 per worker from $378. Like most states, Florida taxes companies more if they’ve recently laid off workers who draw benefits.
Hawaii will raise its average unemployment tax 10-fold next year, from about $90 per employee to more than $1,000. And Maryland’s minimum tax will more than triple from $51 per employee to $187. Its maximum will jump from $765 to nearly $1,150.
Federal law requires states to build up unemployment insurance trust funds in good times so they can pay benefits during downturns. The idea is to avoid having to raise taxes or cut benefits in a recession.
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just_another_bozo_on_this_bus (anonymous) says…
The single biggest boost that could be given to business would be single-payer healthcare.
And getting worker's comp away from private insurance wouldn't be far behind.
SettingTheRecordStraight (anonymous) says…
And nothing would hurt businesses (and employees) more than higher corporate, payroll, sales and excise taxes that would be necessary pay for other people's health care.
just_another_bozo_on_this_bus (anonymous) says…
You need to complete the equation, STRS. Their taxes wouldn't go up as much as their insurance premiums would go down, and they wouldn't have to spend nearly as much time dealing with healthcare issues instead of dealing with whatever their core business is. In other words, substantial net gains for businesses and their employees.
Bob_Keeshan (anonymous) says…
STRS is right, because it only makes sense that any higher taxes to pay for health care would be additional costs to what businesses are already paying to cover their employees who will be covered by those higher taxes.
But only the stupid businesses. The smart, profitable, and successful businesses will welcome the relief from 15% increases in employee costs year after year after year with no end in sight.
Luckily, we have STRS to advocate on behalf of the stupid businesses and protect their ability to continue down their path to bankruptcy.
75x55 (anonymous) says…
The faith that some folks put in 'government' is truly astounding.
SettingTheRecordStraight (anonymous) says…
So why will my family's premiums stay the same or increase under government health care while my income tax rate also rises?
Sounds like a lose, lose, lose - unless, of course, you're the beneficiary of other people's redistributed income or you're interested in controlling as many of us as possible with new and bigger government programs. You guys have been listening to way too many of Brian Thompson's NPR infomercials for government health care.
just_another_bozo_on_this_bus (anonymous) says…
"So why will my family's premiums stay the same or increase under government health care while my income tax rate also rises?"
That's pretty easy-- the so-called reform working it's way through Congress is not single-payer. It's little more than enforced subsidies to the same insurance companies that are already ripping us off and blocking access to healthcare to millions as a "bonus." There will be no "government-run healthcare."
Bob_Keeshan (anonymous) says…
When at first you don't succeed, take the STRS route and try to blame NPR.
snap_pop_no_crackle (anonymous) says…
"Higher taxes could hinder hiring"
What was your first clue, Lt. Columbo?
avoice (anonymous) says…
The key word here is "they." In other words, none of you are small business owners, so everything you say is speculative and theoretical. The truth is that small businesses get the shaft from both parties' policies. The Republican policies help businesses in general, but because they treat big business the same as small business, they actually give big business major marketplace advantages that can drive small business out of the competition. On the flip side, Democratic taxing policies affect small businesses as much as -- or, often, more than -- the big businesses they are trying to target. Small businesses are not effectively represented by either political party. No wonder "independent" is the largest growing political segment of the U.S. population. This goes hand-in-hand with the large number of people trying to run small businesses in this country and getting no support from any government policies.
75x55 (anonymous) says…
"Small businesses are not effectively represented by either political party. No wonder “independent” is the largest growing political segment of the U.S. population. This goes hand-in-hand with the large number of people trying to run small businesses in this country and getting no support from any government policies."
Excellent comments - which only give support to a conservative 'takeover' of the moribund Republican party. The Democratic party is now completely overwhelmed with the radical left agenda of full government control, bordering on fascism, so don't expect any favors for small business in any foreseeable future. Republican party looks much like it did from the 1950s forward, with the brief conservative revival headed by Reagan. At least they have had a brief shining moment with some potential for small degree of redemption.
Conservative values of less government and greater liberty are the only proven pathways to economic prosperity. There are many that will not accept that, because prosperity isn't their primary goal - only a catch phrase to promote whatever agenda they may have, usually involving the manipulation and control of the people to their benefit.
monkeyhawk (anonymous) says…
Here is a sobering example entitled "The Decline: The Geography of a Recession".
It is based upon US Dept. of Labor's Bureau of Labor Statistics.
http://cohort11.americanobserver.net/...