On The Money: Unemployment Penalty

California $9 Billion in the Red

California employers will be paying higher taxes this year – and many will be surprised to find out the feds are asking them to dig deeper into their pockets.

Joe Thompson was hoping to hire some extra help for his Gold Rush Grille in Sacramento.

But a new tax affecting California employers has changed everything.

“It would stop us from bringing in a part time person right away in January,” Thompson told CBS 13. The new tax could take the sizzle out of any sort of economic recovery.

“I think this is going to catch employers completely off guard,” stated Teresa Casazza, president of Cal Tax, the state’s oldest and largest organization representing taxpayers.

Starting this month, California employers will be paying out $280 million more for unemployment insurance.

“It represents about a 37% tax hike,” said Loree Levy of the Employment Development Department.

The Feds are imposing a tax hike because California’s Unemployment Trust Fund is more than $9 billion in the red. The state has failed to pay back a federal loan for two years in a row – so employers must now shell out more – about $21 more per employee per year.

Joe Thompson has 17 employees as a restaurant owner and caterer, but he says he’ll put hiring on hold.

“We were hoping going into the New Year we would be able to hire somebody,” Thompson told On The Money. But the new tax he said, is “going to take away our possibility of bringing somebody new in.”

California has the second highest unemployment rate of any state – with nearly one out of every eight adults out of work.

And the longer those folks have been unemployed, the harder it is to find a job. Just ask Synergy Brown. She’s been looking for work for three years.

“Well they say they are looking for people who are already employed, so I think that’s the biggest thing and the hardest thing about it personally,” she told CBS 13.

And Tony Rinchak says he’s finding the same hurdles in his job hunt.

“And they say you’ve had too many jobs or you’ve been out of work too long,” said Rinchak. “Well I didn’t create the situation. I didn’t create the recession,” he added.

So ironically, as much as the unemployed would like to find work, many businesses will be facing a cash crunch for the New Year, because California’s default means higher employment taxes.

“It continues to be an ongoing struggle,” said Teresa Casazza of Cal Tax. “It’s not going to help us get out of this economic downturn,” she told CBS 13.

California employers will be shelling out an extra $280 million in 2012, but even more in 2013, when the Feds will be demanding $600 million – or roughly $42 more per employee.

More from On The Money
  • Jerry is a traitor

    What a bunch of B.S That piece of chit Jerry Brown needs to put his balls on, And take away any type of funding for illegal Alien Roaches!

  • Uncle Bob

    And people wonder why it’s such a big deal for teh State to run a deficit? Or why they should care about deficit spending?

    It’s because this is the type of thing that will happen … and now is happening. Eventually the State has to pay back the money … and when the Legislature fails to do it’s job … first, the businesses within the State will be forced to pay … and eventually the People and Property Owners of the State could be forced to pay more in taxes as well.

    This is all the result of the entitlement driven reckless Socialist spending in this State. Once again proving that Socialism fails again.

    • Tom

      GO ! UNCLE BOB ! and remember the tax payers of Californis handed out over 21 billion dollers in free services to illegalls last year.That could of payed off the feds when are Californians going to wake up and send this illegal trash back to there country’s like are laws on the books say to.OOH ! WAITE LIBERALAS IN OFFICE .

      • Phil

        They aren’t going to hire over $21??
        Are you kidding me or did I read that wrong??

  • nothingchanges

    It looks like there will be more mass exodus from the state of California.

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