Unemployment Taxes
Businesses hit hard by the recession during the past two years are in for the tax system’s version of a follow-up sucker punch in 2010. In 35 states, the rate for unemployment taxes will rise (automatically, in most cases) due to the heavy toll absorbed by the state trust funds for the payment of unemployment benefits. Their trust fund balances and current rates of tax are insufficient to cover their ongoing costs for unemployment compensation (UC). Because the UC benefits constitute a legal entitlement, the states must continue to pay the benefits even if they don’t have the money.
The states collected an aggregate of $ 31.0 billion in state unemployment taxes in federal fiscal year 2009. During the same time period they spent more than double the amount approximately $ 75.0 billion on regular UC benefits and $ 4.1 billion on extended UC benefits.
To meet their UC benefit obligations, half the states are already borrowing from the Federal Unemployment Account (FUA) within the federal government’s Unemployment Trust Fund (UTF). These states owe more than $ 26 billion to the account as of December 29, 2009. They will continue to rack-up more debt in 2010, and several additional states will join them in borrowing from the FUA during the coming year. States with loan balances outstanding as of December 29, 2009 are: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Virgin Islands, Virginia, and Wisconsin.






