Employers Hit By Unemployment Tax Hikes
30th September 2011
Not really news, but a useful reminder. This prevents job creation in two ways: Employers have less money to pay new employees because they’re supporting more and more unemployed people through the unemployment tax, and employers are more reluctant to hire new employees because it costs real money to get rid of them once they’re on board. These are also major reasons behind chronic high unemployment in Europe (coupled with the disincentive to go back to work when being paid not to work is always an alternative).
Last year, employers paid 27.8% more in state jobless taxes, said Doug Holmes, president, UWC Strategic Services on Unemployment & Workers’ Compensation, a business trade association.
“Unemployment taxes, which were a relatively low bottom-line cost in 2008, are now becoming a significant cost,” Holmes said. “It discourages companies from electing to hire new employees.”
But wait! There’s more!
This is the first time during this economic downturn that states have had to pay interest on their federal borrowing, which currently totals nearly $38 billion. The 2009 stimulus act waived interest payments for two years, giving both cash-strapped states and their employers some breathing room.
The problem with socialism, as Margaret Thatcher so famously pointed out, is that eventually you run out of other people’s money.
For Margery Keskin, an executive at four construction-related companies in upstate New York, the extra $2,000 her companies had to shell out means less money goes to bonuses or profit sharing for her roughly 40 employees. And she will have to think twice before she hires anyone.
“We try not to hire because we will be socked by a bigger tax bill for unemployment insurance,” said Keskin.
Thank you, Obamassiah, for all you’ve done for us.