State tax push makes U.S. firms wary of adding jobs

By Bob L.
Federal, State, City, County, no matter how you do it, say it, collect it, it comes down to the same thing, Bankruptcy, foreclosure, loss of Business, loss of jobs, and loss of taxes to keep this Country from going Bankrupt.
Until the Governments stop their GREED, and stop spending money that does not belong to them and start bringing BUSINESSES back to this Country, and lowering taxes to all and stop lining their pockets, this Country is in for a big crash again, and mite not recover this time.
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By Carey Gillam

OVERLAND PARK, Kansas (Reuters) – Dave Huston’s Kansas-based plastics company is down to 34 employees from 63 a year ago. With the U.S. recession starting to retreat, he would like to add back workers but will likely buy new equipment instead.

The reason? With Kansas joining the ranks of U.S. states scrambling to shore up a near-insolvent unemployment insurance fund, Huston’s business is facing an almost certain rise in state payroll taxes in 2010.It’s a hit his business cannot afford — and one that virtually ensures he will not be hiring new employees anytime soon, even as the economy does slowly pick up.

“I’ve lived through a couple of these recessions but this is by far and away the worst I’ve had to put up with,” said Huston, whose Olson Manufacturing was started in 1917 by his grandfather to produce drafting products.

Welcome to the jobless recovery. Unemployment claims have hit states so hard that they are raising taxes on businesses at a time when employers can least afford it.
At least 33 states will experience some form of unemployment insurance tax increases in 2010, according to the National Association of State Workforce Agencies.

The result is a vicious cycle that discourages businesses from hiring new employees and severely strains both states and job seekers.

‘DIRE SITUATION’

“It’s a dire situation,” said Sujit CanagaRetna, fiscal policy analyst with the U.S. Council of State Governments.
“Raising payroll taxes is going to be the approach that a lot of states start following. These states are just broke,” CanagaRetna said. “But this is the worst possible time to go ask employers to pay more money. It is a very unfortunate double-edged sword … a jobless recovery.”

Florida, Rhode Island, Hawaii and Maryland are among those expected to push payroll taxes higher next year. Also on the list are New Jersey, where business owners face a near doubling of taxes in 2010, and Indiana, which plans a 35 percent hike, though state Republicans are seeking a delay.

Then there is Oregon, which already bumped up taxes for the unemployment trust fund by nearly 30 percent. Oregon has paid out well over $2 billion in benefits so far this year as it struggles with a jobless rate of 11.3 percent.

“We really took a very steep dive,” said Oregon Department of Labor spokesman Craig Spivey. “We’re paying out well over $50 million a week in unemployment benefits.”

In addition to raising payroll taxes, states are examining proposals to cut or limit jobless benefits. Increasingly they are turning to the federal government for loans. The state trust funds, which pay out roughly $200 to $400 a week to laid-off workers, have become so overwhelmed that as of mid-November, 24 states and the Virgin Islands had borrowed $21 billion from the federal account, according to the U.S. Department of Labor.

NO-WIN SITUATION?

With the national unemployment rate at 10.2 percent, the highest in 26 years, some analysts predict as many as 39 of the 50 states could be forced to seek federal loans next year.

Kansas, which has a relatively low unemployment rate of 6.4 percent, is one of them.

“Knock on wood we will get through the end of this year, but I’m pretty confident we will be borrowing in the first quarter,” said Jim Garner, secretary of the Kansas Department of Labor. “The magnitude of this recession has tested the unemployment insurance program unlike anything else in the program’s history.”

Karen Campbell, policy analyst in macroeconomics at the conservative thinktank The Heritage Foundation, said policy makers need to be lightening the burden on businesses — not adding to it — if job creation is to get a jump-start.

“What we need now is an employment policy not an unemployment policy,” Campbell said.

For people at the crux of the issue, like Paul Gobea, 45, of Merriam, Kansas, who lost his job of 18 years at Sprint last March, it’s a no-win situation. Unemployment checks have helped keep his rent paid and food on his table. But months of looking for work have made it clear how reluctant businesses are to add workers. New taxes to help fund those unemployment checks won’t help.
“We just need to find a way to get everybody back to work,” Gobea said.
(Editing by Cynthia Osterman)