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 another 13 months. This would mark the sixth time that 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 extend eligibility for this basket of benefits until the end of 2011. 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 percent 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 April 2010, 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 now borrowing money from the feds, whose own regular unemployment benefits account and extended benefits account are both 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 American economy. In my home state of Colorado, small and mid-size 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 benefits fund deficit.
Greg Howard, owner of McCabe's Tavern in Colorado Springs, told the Colorado Springs Gazette his bill spiked a whopping 600 percent. "It's enough to T you off a little bit," Howard told the newspaper. "The dollar amount isn't tremendous, but it's going up six times."_