December 3, 2023

Most States Seen Raising Jobless Tax on Businesses

Unemployment taxes remain low by historical standards: the survey, by the National Association of State Workforce Agencies, found that states have effectively cut the unemployment tax rate on businesses by 64 percent since the unemployment program began collecting taxes from employers in 1938.

The stubbornly high unemployment that has upended the lives of millions of Americans has also depleted the unemployment trust funds of most states: 32 of them owe the federal government more than $48.3 billion that they borrowed to continue paying jobless benefits.

Unless Congress acts, that money will have to be repaid — with interest. The survey found that seven states were thinking about borrowing from the private sector to repay the loans.

Some analysts say that states kept unemployment taxes too low during boom years, so their trust funds were ill-prepared to weather the downturn. Now states find themselves forced to raise taxes on employers just as they need them to create jobs, and to consider cutting benefits while huge numbers of people are relying on them to survive.

Richard A. Hobbie, the executive director of the association of work force agencies, said the survey found that states would collect an average of 16.5 percent more in unemployment insurance taxes this year than they did last year.

The survey did not measure reductions to benefits. Michigan recently decided to pay only 20 weeks of jobless benefits, down from the 26 weeks that most states pay, and other states are following its lead. (The federal government pays for extended benefits after the state benefits run out.) Other states are capping or reducing the amount of money they pay in benefits.

George Wentworth, a senior staff lawyer for the National Employment Law Project, said an unusually large number of states were contemplating benefit cuts. “A number of state legislatures are looking at reducing benefits as one of the ways to try to restore solvency, even though in most states it’s not going to get you there,” he said. “It really erodes the stimulus aspect of the program, 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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