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Unemployment insurance taxes set to rise

Good news, business owners! You’re going to see a tax increase soon.

Most Texas employers should plan for their unemployment insurance taxes to increase significantly next year, Texas Workforce Commission Chairman Tom Pauken of Dallas said Tuesday.

While tax rates won’t be set until December, Pauken said that mounting layoffs are close to exhausting a state trust fund, forcing him and two fellow commissioners recently to authorize what they expect to be $2 billion of interest-free borrowing from the federal government.


Pauken’s projections came nearly three months after Gov. Rick Perry, with the backing of many business groups, rejected $556 million in federal stimulus money for unemployed Texans. He said President Barack Obama and the Democratic Congress attached too many strings to the money and that Texas would have had to expand eligibility for benefits.

Pauken said that though things could still change, it’s probable that the commission next year will need to raise an amount from employers comparable to the amount raised in 2003 – or 2.4 percent of all taxable wages.

In 2003, the “minimum tax” paid by nearly 278,000 employers was 0.67 percent of the first $9,000 of an employee’s wages, or $60.30 per worker. This year’s minimum tax rate is only 0.26 percent, or $23.40 a head.

For all 448,000 employers, the average tax rate in 2003 was 1.67 percent, compared with 0.99 percent this year. If next year’s rates mirror those from six years ago, the average employer would pay about $150 per employee, up from just under $90 this year.

If the commission doesn’t issue bonds to defer the pain into future years, he said, the commission next year would have to slap an even bigger “deficit tax” on employers.

Under that scenario, Pauken said, the commission would have to squeeze from employers an amount approaching 2.9 percent of all taxable wages – a level not seen in the last decade or so.

And just remember, you have Rick Perry to thank for all of this. A statement from Rep. Garnet Coleman about this is beneath the fold.

State Rep. Garnet F. Coleman (D-Houston) criticized Governor Rick Perry for his short- sighted actions in rejecting the unemployment insurance component of the stimulus package, which have resulted in adverse consequences for Texas families and Texas business owners. Tom Pauken, Chairman of the Texas Workforce Commission, announced today that the unemployment insurance tax on Texas businesses will increase significantly due to a depleting unemployment compensation fund.

“Governor Perry put his political ambitions ahead of the needs of Texans by not accepting $555.7 million from the unemployment insurance component of the federal stimulus,” said Representative Coleman. “Now, the Governor has effectively passed the bill onto Texas business owners.”

Estimates now say that the state’s Unemployment Compensation Trust Fund will have a deficit of at least $1.38 billion by October 1, 2009, triggering the implementation of a deficit tax on Texas employers. Chairman Pauken said that in order to make up for the depleting fund, Texas will now be forced to borrow $2 billion from the federal government.

“Texans who lose their jobs in this economy deserve to receive the unemployment benefits that they have paid taxes towards,” said Representative Coleman. “The Governor played politics with the future of Texans by allowing this money to go somewhere other than the Texas economy. His actions have cost Texas families and Texas business owners.”

As a member of the Select Committee on Federal Economic Stabilization Funding, Representative Coleman authored and passed a motion in writing in March, recommending that the Legislature take certain actions to ensure receipt of all Recovery Act funds related to unemployment compensation.

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