President Obama’s Latest Job-Killing Proposal: Increase Payroll Taxes

After vastly increasing the cost of unemployment benefits — which have been extended from the typical 26 weeks to 99 weeks — the Obama Administration plans to propose making it much easier for states to impose a massive increase in state unemployment taxes:

The proposal would aim to restock strained state unemployment-insurance trust funds by raising the amount of wages on which companies must pay unemployment taxes to $15,000, more than double the $7,000 in place since 1983.

The plan, which would take effect in 2014, could increase payroll taxes by as much as $100 billion over a decade, according to a person involved in its construction.

By proposing to enlarge the pool of wages subject to unemployment taxes, the White House appears to be offering states a more politically palatable way to raise revenues than to boost tax rates. States could keep the tax rates they have, or even lower them somewhat, and still raise considerably more revenue than they are raising now. . . .

To avoid hitting businesses with a tax increase during the economic recovery, the proposal would delay the new rules until 2014. The plan is expected to be included in Mr. Obama’s budget proposal for fiscal 2012, to be released Monday.

(Emphasis added).  This is yet another reminder that no government program is ever “free.”  Eventually, someone needs to pay for it, with impacts that can be delayed but never avoided.  That is what is happening here.

States and the federal government decided to extend unemployment benefits to four times longer than normal, and now the system is broke.  So the Obama Administration wants the states to increase taxes on employment.  That’s right, they want to increase the cost to employers of hiring workers.  The inevitable effect of that is to suppress hiring and increase unemployment.

In typical fashion, the Administration wants that to happen after the 2012 election, so the pain is targeted at 2014.  But that’s not how things work.  If employers know that the cost of hiring new employees is right around the corner, they will act now to minimize it.  That would mean fewer new hires now in any event, since, by 2014, the cost of continuing to employ workers would vastly increase with the new tax.

Via Ms. Malkin.

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Published in: on February 8, 2011 at 1:26 pm  Leave a Comment  

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