The injustices pile up so thick and fast that one can’t really keep track. Some state governments are especially prolific in producing them. Governments like the Deadbeat State, formerly known as the Golden State.
Now businesses in California must pay the price for the state government’s profligacy during the pandemic, when it borrowed $20 billion from the federales to help pay unemployment benefits. California is refusing to repay.
In the budget proposal for 2023-2024, $750 million had originally been set aside to begin repaying this debt. But Governor Gavin Newsom killed the provision. So, in accordance with federal regulations, businesses must take up the slack. Starting in 2023, the unemployment tax rate that businesses will pay, which had been 0.6 percent, is being increased by 0.3 percent until the loan is repaid.
“California is just not really an employer-friendly state,” says Marc Joffe of the Cato Institute. “This one thing will not be a difference between a business remaining open or closing, but it’s just another burden on top of the many burdens the state puts on employers.”
A major contributor to the size of this debt is the state’s failure to act to prevent massive fraud in filings for unemployment benefits. LexisNexis estimates that fraudulent payments amount to more than $32 billion.
California taxpayers must pay for this unsalutary neglect one way or another. But what Newsom has done ends up penalizing businesses in particular.
Yet another reason to avoid doing business in the state.
This is Common Sense. I’m Paul Jacob.
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1 reply on “Deadbeat California”
Given a tax on a transaction, whichever party is least sensitive to costs ends-up paying more of the tax. (If buyers aren’t going to change the quantities that they seek at all in the face of the tax, then the buyers will pay all the tax; if sellers aren’t going to change the quantities that they offer at all in the face of the tax, then the sellers will pay all the tax; but usually the burden is shared.) Employees virtually always bear some of the burden of a payroll tax, in the form of lower wages or salaries.
So not only did the state of California encourage people to forgo employment by offering greater unemployment benefits; they are now discouraging people from working, by pressing down on wages and on salaries.
And Cato may imagine that this straw will not break the back of any camels, but I am not so sanguine.
(By the way, burden of CEO taxes about which the left prattles would mostly fall upon stockholders, compelled to pay still higher pre-tax compensation to CEOs. The left would of course yowl about how CEOs were getting even more more money, when really they’d be getting about the same amount after tax.)