Unemployment Taxing Texas Businesses

RE: “Turning down federal unemployment money might tax Texas businesses anyway” By DAN WALLACH

Lonnie Arrington is president of Fabric on International in Beaumont, a company that makes pressure vessels for use in the petrochemical industry.

Arrington said he employs about 120 people and the annual payroll is about $6.9 million. Last year, he paid a combined $14,824 in state and federal unemployment taxes. This year, he'll pay $23,532, a 59 percent increase.

Arrington said he prefers not to see the unemployment law changed because it will add to his tax burden. He hopes instead the economy improves and the extra tax he might have to pay to cover the shortfall in the unemployment trust fund is taken off.

(Source: http://www.beaumontenterprise.com/business/local/turning_down_federal_unemployment_money_might_tax_texas_businesses_anyway_03-16-2009.html)


In 2008, at a time when Texas State Unemployment Insurance rates should have been rising because of the national recession, the insurance rates paid by employers into the Trust Fund actually went down.

The Minimum Rate (often called the “preferred rate”) was only 0.10% compared to 0.29% in 2007. The Maximum Rate (often called the “inexperience rate”) dropped from 7.70% to 6.10%.

And, now the state claims that it is running a deficit. By law, the Deficit Tax Rate should kick in as it did in 2002, when Minimum Tax Rates jumped from 0.30% to 0.67% and Maximum Rates jumped from 6.54% to 8.47%.

Whenever there are massive layoffs, the business community is taxed at a rate to replenish UI Trust Funds depleted by unemployment claims.

Notice also the disparity between “preferred rates” and “inexperience rates”. The brunt of the State Unemployment Insurance Fund falls onto the back of small business. These are the companies that are projected to pay 6.26%, though not nearly as high as the 2003 rate of 8.47%, but still nearly 25 times more than the preferred 0.26%.

Mr. Arrington states: “He hopes instead the economy improves and the extra tax he might have to pay to cover the shortfall in the unemployment trust fund is taken off”, and yet he would reject the very financial assistance that would head off the Deficit Tax Rate.