More Recession Troubles: States Plan To Raise Unemployment Tax on Businesses

April 28, 2011  |  

By Charlotte Young

As unemployment still lingers near nine percent and states continue to be in debt to the federal government, more than two-thirds of the states are planning to raise unemployment taxes on businesses to restore jobless benefit funds.

The New York Times reports that thirty-two states owe the federal government more than $48.3 billion, which was borrowed to assist paying jobless benefits. This amount must be paid back with interest. A survey by the National Association of State Workforce Agencies reveals that seven states are even contemplating borrowing from the private sector to repay loans.

States have been keeping unemployment taxes on businesses low, even cutting the tax rate by 64 percent since 1938 when the unemployment program began collecting taxes from employers. Now it appears that states are demanding too much from businesses; besides states raising taxes on employers, businesses are also expected to create jobs and cut benefits.

Michigan has already taken the lead with this idea. The state is offering 20 weeks of jobless benefits compared to the 26 weeks that a majority of states pay.

Senior staff lawyer for the National Employment Law Project, George Wentworth, reveals that reducing benefits will not “restore solvency” in most states.

“It really erodes the stimulus aspect of the program,” he said. “And it undermines its purpose, which is to provide workers with a partial wage replacement that they can manage on until they find another job.”

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