spot_imgspot_img

California businesses shocked by payroll tax hikes from $55B unemployment fraud

spot_img

(The Center Square) – Many California business owners are shocked by payroll tax increases incurred by the state’s $55 billion COVID-19 pandemic-era unemployment and payroll benefits fraud – which is more than NASA’s annual budget – incurred from automatically approving applications.

States that do not pay off unemployment benefit loans from the federal government, as California and a handful of other states have done since the pandemic, automatically are subject to rapidly increasing federal payroll tax increases until the debt is paid off.

Chef Andrew Gruel, who owns and runs Calico Fish House in Huntington Beach, took to X to explain his recent experience paying his workers in a post that has since garnered over 16 million views.

“We just ran payroll. The payroll taxes were 2K higher than calculated. We called the payroll company,” said Gruel. “They explained (in summary) that California has a budget shortfall, and the federal government wants money back that it lent California for UI that it ‘lost.’ They are making up for it by having business owners pay it.”

While the state was responsible for the management of lockdown-era unemployment benefits, business owners are footing the bill.

“California gave out billions in unemployment during COVID, much of which was fraudulent,” said Assemblyman Bill Essayli, R-Corona, on X in response to Gruel. “Now businesses are left to pick up the tab. Newsom could have paid off the deficit, but he elected to give out $5 billion in healthcare coverage to illegal immigrants instead.

Oklahoma Gov. Kevin Stitt used the opportunity to encourage businesses to abandon California and its taxes and seek lower taxes elsewhere.

“Crazy…payroll tax hikes to cover up government spending in California,” said Stitt on X. “Oklahoma is open for business. Come to a state where you’re not on the hook for the state’s financial mismanagement.

The California Budget and Policy Center, a left-of-center think tank, said in an October report that the state does not raise enough money to pay for current unemployment benefits, let alone pay down the $21 billion in unemployment benefit debt to the federal government.

“Even today, with a relatively low unemployment rate hovering around 5%, California does not raise enough revenue to pay for current UI benefits, much less pay down its trust fund debt,” said the CBPC. “In addition to regular SUTA taxes, California employers are paying a 15% tax surcharge to pay back the trust fund loan, but this additional revenue is still not sufficient to reduce the principal.”

CBPC also said that the state’s debt to the federal government is so high that the principal owed is continuing to grow.

“The state Employment Development Department projects that at the current rate of repayment, the outstanding federal UI loan balance will grow to nearly $22 billion in 2025,” continued CBPC.

Earlier this year, The Center Square reviewed reports from the state’s nonpartisan Legislative Analyst’s Office on the state’s unemployment insurance debt, finding analysts expect the unemployment benefit deficits to grow in the coming years, even in a growing economy.

“The administration anticipates this imbalance will increase to about $1.6 billion annually in 2024 and 2025,” wrote the LAO. “Historically, benefit payments have only exceeded contributions during major economic downturns – most recently, during the pandemic and Great Recession.”

The automatic tax increases triggered by owing borrowed unemployment benefits money to the federal government for two years or more is $21 per employee per year, or about $400 million more per year for the state.

California, New York, and the US Virgin Islands are the only jurisdictions subject to the payroll tax increases. Connecticut and Illinois had taken on debt and were subject to payroll tax increases but have since paid back their outstanding loans, while the Virgin Islands have had an outstanding balance since 2010.

The Department of Labor says that the annual federal tax will rise to $105 per California employee for 2024, up from the $42 baseline.

Starting with the third year of automatic increases, or 2025, the businesses are subject to an additional increase on top of the existing automatic hike. In the fifth year, or 2027, an even higher reduction add-on kicks on. New York has a state-specific employment tax surcharge to pay down interest, but California does not.

DON’T MISS OUT

Be the first to know about the latest news, giveaways, events, and updates from The Black Chronicle!

We don’t spam! Read our privacy policy for more info.

spot_img
spot_img

Hot this week

African and Caribbean Nations Call for Reparations for Slave Trade, Propose Global Fund

Nations across Africa and the Caribbean, deeply impacted by...

Health care company agrees to pay $22.5 million to settle claims of over billing

A health care company agreed to pay nearly $22.5...

Sports betting expert offers advice on paying taxes for gambling winnings

(The Center Square) – Tax season is underway, and...

Entertainment district benefits don’t outweigh the cost, economists say

(The Center Square) — Weeks later, after more details...

Business association ‘disappointed’ by WA L&I’s proposed workers comp rate hike

(The Center Square) – The Association of Washington Business...

Changes enacted to North Carolina juvenile delinquent law

(The Center Square) – Some parts of juvenile delinquent...

Wikler tosses hat into national chairman ring

(The Center Square) – Wisconsin’s Democratic Party leader is...

King County Councilmember Girmay Zahilay joins county executive race

(The Center Square) – Metropolitan King County Councilmember Girmay...

Audit finds Louisiana improved its response time to abuse complaints

(The Center Square) — The Louisiana Department of Health...

Illinois quick hits: Pritzker names early childhood director

Pritzker names early childhood director ...

Duo indicted for faking ESA application documents

(The Center Square) – Individuals in an Empowerment Scholarship...

Op-Ed: The real climate crisis is about power, not just energy

A small nation's defiant exit from COP29 has exposed...

Challenging Trump, California to pay for migrant deportation defense

(The Center Square) – U.S. Sen. Alex Padilla, D-Calif.,...

More like this
Related

Changes enacted to North Carolina juvenile delinquent law

(The Center Square) – Some parts of juvenile delinquent...

Wikler tosses hat into national chairman ring

(The Center Square) – Wisconsin’s Democratic Party leader is...

King County Councilmember Girmay Zahilay joins county executive race

(The Center Square) – Metropolitan King County Councilmember Girmay...

Audit finds Louisiana improved its response time to abuse complaints

(The Center Square) — The Louisiana Department of Health...