The Next Wave of Taxes on Business

John Ligon / March 15, 2010

In an attempt to solve the nation’s current economic woes, legislators remain fixated on a single solution: federal stimulus spending. This is the wrong solution, regardless of the sweet rhetoric used by some Washington lawmakers, and is no economic stimulus.

Two days ago the Senate passed (62 to 36) another round of stimulus (this time dubbed a “jobs bill”) which, among other items, extends unemployment benefits for up to one additional year.   Unemployment benefits will now extend to two years under federal law which begs the question:  Are these benefits becoming a de facto welfare program?

Moreover, states and businesses have been bracing for the pain of financing these changes for a while now; State governments are already drawing on ‘loans’ from the federal government.

By 2012, States unemployment trust funds are expected to be fully depleted—at which time the federal government will have to replenish these funds with approximately $90 billion.

States are also turning to higher tax rates faced by employers in those states to cover the costs of these extensions.  States like Hawaii are floating a tax-rate hike as much as 600 percent, and 35 states will likely raise the unemployment tax rates faced by businesses.  Also, it will force many businesses, especially small businesses, to defense against rising costs at a time when the economy could be looking at an upswing. (more…)