Federal Unemployment Insurance

Our state constitution mandates a balanced budget. But it turns out there’s a loophole and, over the last four years, one department of state government has incurred a 2.5 billion dollar debt – by spending money off budget.

Early in the recession, in 2009, job losses drained our state’s unemployment fund. The reserves were gone. The money was gone. But the number of people filing unemployment claims was going up. So, Washington stepped in and loaned the North Carolina Employment Security Commission $2.5 billion dollars to pay unemployment benefits – off budget. Now, Washington wants its money back and using a claw back provision that would make a Wall Street banker proud, it’s determined to get it.

There are two unemployment taxes: FUTA, the federal tax; and SUTA, the state tax. Washington has ordered a tenfold increase in the FUTA tax paid by North Carolina employers from $42 to $420 dollars per employee per year – to be phased in over the next a decade and a half.

So just when small businessmen hoped they were seeing a light at the end of the tunnel – instead they’re about to get run over by a big tax increase from Washington putting a roadblock in the way of North Carolina creating new jobs.

And that’s not all. The FUTA tax isn’t spread equally over all employers. Instead, some pay it and some don’t. For instance, government doesn’t pay FUTA taxes. Not a penny. Neither do non-profits that employ thousands of people. While they pay a reduced state tax, it means government gets a free ride on the federal tax and small businesses pay the bills.

The issue here isn’t just money or taxes – it’s jobs. And this is a case study of how government makes it harder for small business owners to create jobs.

Leave a Reply