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State governments in California and Nevada are borrowing heavily from the federal government to keep paying unemployment benefits. In order to pay these loans, both states are raising payroll taxes to pay off the loans.

Nearly $41 billion dollars by the states have been borrowed from the Feds to replenish depleted Unemployment-Insurance Funds. California has borrowed $8.8 billion alone.

What is particularly objectionable is how California is raising the payroll tax rates on employers. Payroll tax rates on employers in California run from .2 per cent to 6.2 per cent on the first $7,000 of each employee’s wages. The lowest rates are assigned to long established businesses with no claims and the highest rates to businesses with high claims. The system runs A to F.

Where California is ripping Small businesses off is EDD is assigning F+ ratings to even businesses established 20 years and no claims.

The statutory rate for the employer contributions to payroll taxes has not been increased…although that is likely coming…but the effective rate has been dramatically increased.

California and Nevada have some of the highest unemployment rates in the country. The Government is shooting itself in the foot with such dishonest business practices. This stealth payroll tax increase is imposing an additonal payroll tax on business at a time when we’re trying to keep the costs of hiring down and reduce the unemployment rate.

Dana M. Ronald
Tax Crisis Institute