Small-Biz Killers: Who Pays For Jobless Benefits?
By Michelle Malkin
There is no such thing as a "free" government benefit. Ask small-business owners who are footing skyrocketing bills for bottomless jobless benefits.
While politicians in Washington negotiate a deal to provide welcome temporary payroll-, income- and estate-tax relief to America's workers, struggling employers wonder how long they'll have to pay for the compassion of others — and whether they can survive.
The Beltway deal hinges on extending federal unemployment insurance for an additional 13 months. This would mark the sixth time the deadline has been extended since June 2008.
State unemployment benefits last up to 26 weeks. Bipartisan-supported Washington mandates have raised that to 99 weeks. The current proposal would raise the total to 155 weeks.
The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year. (At the federal level, employers must pay 6.2% of the first $7,000 of income to keep the system afloat.)
The combined burden of these hidden state and federal payroll taxes has exploded during the recession as President Obama's economic recovery interventions backfire and the jobless rate remains stuck near double digits.
State unemployment insurance funds have gone broke in nearly half the states. As of last April, unemployment tax analyst Douglas Holmes testified before the Senate, 35 states and jurisdictions had unemployment fund-related debts worth $39.5 billion. Anti-fraud efforts to prevent scams and overpayments are woefully underfunded.
In an interminable money shuffle, these bankrupt state unemployment insurance funds are borrowing money from the feds, whose own regular unemployment benefit account and extended benefit account are in the red. Washington is relying on transfers from the federal general revenue fund to cover loan obligations related to all these hemorrhaging accounts.
Who pays? Dentists, tavern owners, maid services, mom-and-pop shops — small businesses that are the backbone of the U.S. economy.
In my home state of Colorado, small and midsize firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year. The businesses that have the lowest claims histories are getting punished the most to make up the jobless benefit fund deficit.
A painting contractor told me this week that her nine-person company's first-quarter UI bill has gone from $1,000 to more than $6,500 over the past three years.
"It's killing us!" she told me. "How can we hire additional employees? This is a big increase in addition to the health insurance annual increases, etc. We had to reduce our employees' wages by 10% this year, and who knows when we will be able to bump them back up?"