I wrote a piece about the rising unemployment insurance costs for small business owners awhile back and now it is coming to fruition. Make sure to check out the percentile change for my home state, Hawaii. It’ll blow your mind.
NEW YORK (CNNMoney.com) — Employers are getting hit with a massive tax hike at a time when they can least afford it.
Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.
The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.
Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.
The states are scrambling to restore their unemployment insurance trust funds, which cover claims.
State trust funds have been decimated by the Great Recession, forcing a record 26 states to borrow a total of more than $30 billion from the federal government. The numbers are expected to grow to 40 states borrowing $90 billion by 2012, said George Wentworth, policy analyst at the National Employment Law Project.
“States are going to be facing higher unemployment tax rates for some period of time,” Wentworth said.
In addition, employers pay federal unemployment taxes. If states don’t repay their federal loans, businesses could see their federal tax go up as well in coming years, said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
Hawaii is already ranked 42nd in small business survival. How many small business are going to hire more workers, if and when we start to recover, when their insurance rate will be over $1,000 per employee in comparison to say Texas with it’s raised tax of $64.80? If you were a business person in Hawaii, would you be thinking of moving back to the mainland?
Texas is one of the hard-hit states. Though its unemployment rate is a relatively low 8.3%, jobless claims have soared. In December, Texas paid 330,000 residents a total of $325.7 million, up from 228,000 people claiming $216.8 million a year earlier.
The state began borrowing from the feds in July to pay unemployment benefits and now owes Washington $1.6 billion, said Ann Hatchitt, spokeswoman for the Texas Workforce Commission.
So employers in the Lone Star State will have to pay at least $64.80 in tax per worker this year, up from $23.40 a year ago. This is the highest rate in 20 years.
“After having a period of high demand on the unemployment trust fund and rising unemployment, we had to set the rates for 2010 to replenish the trust fund,” Hatchitt said.
Employers in some other states could face even steeper hikes, unless their legislatures act quickly.
In Hawaii, taxes automatically increased from an average of $90 per worker in 2009 to $1,070 this year. Part of the problem stems from the fact that the state was generous to businesses during prosperous times. In fact,lawmakers lowered the tax rate in 2007, when unemployment did not exceed 3.1%. The state’s jobless rate now stands at 6.9%.
Concerned that this hike will crush local businesses, Republican Gov. Linda Lingle is urging lawmakers to limit the increase to 60% of the proposed hike.
“We believe strongly that anything beyond this 60% threshold will cause large job losses,” Lingle said last month.
Excuse me while I heave into the bucket that is now stationed next to my desk. Neil Barofsky, the inspector general for TARP, in his latest report, states that a TARP program for small business lending (March 2009) has not yet been implemented. Whiskey Tango Foxtrot Award to the Treasury and TurboTax Timmie anyone?
TARP ain’t getting the job done? I would be laughing my a** off if this situation wasn’t so tragically disastrous to the entire nation and our childrens’ futures.
The next question would be: Who are the stupid Americans? The Elites or the Tea Party Patriots that were against ALL of these programs because we knew it wasn’t going to help average Americans keep their jobs, homes, savings…
The $700 billion bailout program for the financial industry has so far done little to boost bank lending, aid small businesses or reduce home foreclosures, a top government watchdog said in a report.
Neil Barofsky, the special inspector general over the Troubled Asset Relief Program (TARP), said in a report that while the bailout has helped stabilize the financial system, many of the program’s original goals have not been met.
“Lending continues to decrease, month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury,” Barofsky wrote in the report. “The TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation.” (Editor’s note: AYFKM?)
The Obama administration is urging Congress to pass an additional fiscal stimulus measure, or “jobs bill,” early this year to help bolster the economy. Lawmakers are anxious about the economy weighed down from 10 percent unemployment and ongoing weakness in the housing market.
This is a perfect representation of why Americans are mired in the indecision about whether the elites are doing this on purpose, or if they are just plain stupider than 75% of the country. I’m voting for the former, and looking for outsiders to run against the District of Criminals’ squatters. Besides, if they are stupider than average Americans, why are they in office? Once again, Too Stupid or Too Dangerous?
I am pretty much freakin’ speechless at the moment. Maybe Goldman has figured out that without small business, they are screwed, and after Blankein’s comment about doing God’s work, they are really screwed without the apology and cash on the barrel head. Now if there was someway to have Goldman and SEIU neutralize each other, I think we would be ahead of the game.
The $500m investment includes a $200m contribution to community colleges, universities and other institutions to give grants to small business owners to further their education.
It will funnel $300m through community development financial institutions to increase lending and technical assistance available to small businesses.
In addition, Goldman Sachs executives, in partnership with national and local business organizations, will aid small businesses with advice, technical assistance and professional networking opportunities.
An advisory council co-chaired by Mr Blankfein will oversee the initiative. Mr Buffett, Goldman’s largest shareholder, and Harvard Business School Professor Michael Porter will serve as co-chairs.
“Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs,” Mr Buffett said in a statement. “I’m proud to be a part of this innovative program which provides greater access to know-how and capital — two ingredients critical to success.”
CIT Group Inc. filed for bankruptcy protection Sunday, in a final attempt to restructure and keep the doors open at the century-old commercial lender.
Now, the lender to nearly a million small and midsize businesses must maintain its customer base as it tries to rehabilitate under Chapter 11 protection. Most financial firms sell off assets or liquidate in bankruptcy amid fears that customers will draw down credit lines and spark a run on the bank.
But CIT garnered support from about 90% of voting debt holders for a prepackaged reorganization plan that could allow the lender to speed through Chapter 11 and emerge with a new business model by year’s end. Under the plan, bondholders will exchange their debt for new debt that matures later, as well as nearly all the equity in a reorganized CIT.
The bankruptcy stay would eliminate some $10 billion in debt from the lender’s balance sheet, the company said. CIT has been weighed down by more than $30 billion in bond debt.
A $2.3 billion taxpayer bailout extended to CIT late last year under the Bush administration will be wiped out in the bankruptcy. Common shareholders will be wiped out, too.