News Story

Coming Soon: Higher Business Payroll Taxes

Employers are expecting 'significant' increases in unemployment insurance payroll taxes

The state of Michigan owes the federal government $3.8 billion in unemployment insurance loans and will have to start making $150 million a year on interest payments if Congress doesn’t extend a waiver by Friday.

Governor-Elect Rick Snyder went to lobby Congress recently so it could waive the interest payments on the loan, reported.

Snyder’s office didn’t respond to a phone message or e-mail.

In Michigan, businesses pay for the first 26 weeks of unemployment benefits. After that, it’s a mix of businesses and the federal government that fund the various extensions.

The state borrows money from the federal government when the unemployment fund is exhausted, and that has to be paid back by the businesses.

“Barring any changes, employers are going to see significant increases in unemployment insurance payroll taxes,” said Charles Owens, the Michigan director of the National Federal of Independent Businesses.

Some business could pay hundreds of dollars a year per employee in taxes to pay off that debt.

Only California has borrowed more money than Michigan to pay unemployment benefits, according to the National Conference of State Legislatures.

Michigan started borrowing as far back as September 2006 while almost every other state didn’t start tapping the feds until 2009.  South Carolina and Indiana were the next earliest dates and they started borrowing in December 2008.

According to the National Federation of Independent Businesses, the latest unemployment extension recently approved will be paid for by the federal government and not go on Michigan’s tab.

According to the state, more than 800,000 people received $5.3 billion in unemployment benefits through November, 2010. That included all extensions.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.