Tax rate balloons

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies. The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold. Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates. In addition, employers pay federal unemployment taxes. If states don't repay their federal loans, businesses could see their this federal tax go up as well in coming years, said Rich Hobbie, executive director of the National Association of State Workforce Agencies. Higher taxes dampen employers' ability to hire new workers, crimping any nascent economic recove
ry. Companies pay taxes on each employee on the payroll. "There's no doubt it discourages hiring," said Douglas Holmes, president of UWC-Strategic Services on Unemployment and Workers' Compensation, an employers' trade group. "In fact, it leads to increased unemployment." Texas, Hawaii, and Florida are the hardest hit.