Self-Fulfilling Unemployment Tax
David Adams caught this New York Times article on states' unemployment insurance funds:
"It is something that we are concerned about," said Kim Brannock, a spokeswoman for the Office of Employment and Training in Kentucky, where the unemployment trust fund balance now sits at $133 million, compared with $250 million a year ago. The fund has not borrowed money from the federal government since the 1980s. "At this point we are solvent," she said, "but we are monitoring the situation."
David notes:
Borrowing from the federal government is the first option when these funds run out. Raising taxes is the second.
We're #34 according to the Tax Foundation's 2009 State Business Tax Climate Index. Kentucky receives low marks across the board with the exception of sales tax. Kentucky is indexed at a particularly high unemployment insurance rate.
We're the third-worst unemployment insurance rate, to be exact. From the report:
The states with the worst UI taxes are Rhode Island, Massachusetts, Kentucky, Alaska and Michigan. These states tend to have rate structures with high minimum and maximum rates and wage bases above the federal level. Moreover, they have more complicated experience formulas and charging methods, and they have added benefits and surtaxes to their systems.
In other words, our unemployment tax structure is one of the most self-fulfilling. It especially punishes employers in trouble, increases the burden in tough times, and is generally unattractive to new employers.
We don't hear much about the unemployment insurance tax, but we should pay more attention. We can have a better system.
