We’ve covered before how harmful some states unemployment insurance laws are. The basic outline is that some states have harmful automatic tax increase triggers. Businesses are required to pay into state unemployment insurance funds, and if these funds get below a certain threshold rates increase to replenish the fund. Often, as is the case in Florida, these increases are drastic. What compounds the Florida case is the tax increase passed this past June, which expanded the total amount of earnings that must be taxed.

 

Such policies are especially harmful during recessionary periods, like what the economy is currently experiencing. The most unfortunate fact of any recession is the job loss that accompanies it. The increased job losses are a result of companies’ profitability being hurt due to the overall downturn. During recessions costs exceed revenue and companies have to do something in the short term to stay in business. Often this means layoffs, which naturally creates higher demand for unemployment insurance. Employees do not like this for the obvious reasons, and employers do not like it because of the resulting decreases in productivity.

 

 This is where the problem occurs. The higher demand for unemployment insurance drains the fund quickly. The misguided policy of tax increase triggers requires the drastic rate hikes that Florida is about to experience. The layoffs happened in the first place because businesses could not cover their costs. Increasing taxes means an even higher cost burden on the business.

 

It creates a situation where businesses and employees are hurt twice. The recession is bad enough. But then, when they can least afford it, taxes go up. Such tax law structures are illogical and ultimately do more to further the recession than alleviate its impact.

good! perhaps employers will think twice before they "restructure" only to hire cheap immigrant labor as replacements for Americans. it's going on in the hi-tec fields as well as construction. Florida UI benefit payout is among the lowest in the US. big employers deserve a rate increase. screw the Dems & the Repulicans. neither party will do a damned thing about immigration, legal or illegal. What does Obama do about it? his Information Czar AND his Recovery.gov web developer are prime examples. talk is cheap. Janet Napolitano says now that southwest borders are secure it's time to talk about immigration reform. sure make them all citizens so they can vote for Obama's 2nd term.
>> skyla Sunday, November 22, 2009 3:05 PM Report Comment