If you thought 2011 would be the year South Carolina’s economy started making inroads on its chronically-high unemployment rate, think again …
Our state’s already diminished competitive position is about to take yet another major hit – this time due to the ongoing cost of jobs we’ve already lost.
Wait … how is that possible?
Well, businesses across South Carolina are on the hook for $933 million worth of federal unemployment benefits paid out to workers who lost their jobs during the recession – a massive tab that state government is now trying to collect. In fact, Palmetto state businesses are currently being hit with huge tax bills in an effort to repay this debt and replenish our state’s exhausted employment reserve fund.
Obviously, forcing businesses (particularly staffing companies and manufacturing firms) to pick up the tab for tax increases as high as 600 percent will prevent them from hiring (or re-hiring) of thousands of workers over the coming year.
That poses an immediate threat to our state’s economic recovery.
Worse still, these tax increases are specifically targeting companies that were forced to lay off employees during the recession – i.e. companies that “used” unemployment benefits. That means businesses which might otherwise be in a position to rehire workers are instead being forced to send their money to the government.
Once again, way to go “Republicans.”
We began following this issue last Spring – and addressed it again when it reared its ugly head during in the gubernatorial election – but the basic inequity has yet to be addressed.
Exhausted in December of 2008, South Carolina’s unemployment reserve fund once had a balance of $800 million. Problems with the fund’s solvency first began appearing as far back as 2001, though, when it first dipped below federally-recommended reserve levels. Also, until recently the fund was managed by the notoriously corrupt S.C. Employment Security Commission – a legislatively-controlled agency that has since been replaced by the S.C. Department of Employment and Workforce.
Obviously, though, shifting letters around in the “bureaucratic soup” does nothing to solve the immediate problem – stagnant hiring.
According to a plan crafted last year by S.C. Sen. Greg Ryberg (R-Aiken) and House Majority Leader Kenny Bingham (RINO-Lexington), businesses which laid off workers during the recession will be forced to bear the brunt of the cost – shelling out as much as $1,128 per worker.
S.C. Gov. Nikki Haley supports that plan, calling it an “excellent reform” at a press conference last week.
Oddly enough, in backing Ryberg and Bingham’s plan, Haley is endorsing the position of the S.C. Chamber of Commerce – a liberal “pro-business” group that she has sparred with in the past.
We would respectfully disagree with all of them.
State government bureaucracies in South Carolina have received more than $4 billion in “stimulus” funds over the last two years – money that might as well have been flushed down the toilet. If the federal government truly wanted to “stimulate” the economy (as opposed to bailing out bureaucracies) why doesn’t it just forgive this loan?
After all, at least that would “stimulate” something …
Heck, the feds could even make up the difference out of that $703 billion pot of “unobligated” surplus funding sitting around in Washington, D.C.
Or … instead of bailing out state government agencies to the tune of $100 million (with another $125 million bailout coming), why don’t Haley and her legislative allies use that money to ease the burden on South Carolina businesses?
Right … that would make too much sense.
Our state has never been competitive economically, just as it has never managed its resources responsibly.
Based on its handling of this situation, we don’t see that changing any time soon.
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21 comments
Is your suggestion of just forgiving the debt all you have to offer as a solution?
Fits, I think at one time the rate was higher to employers and was lowered because it was “too much of a burden”. How about doing some investigative journalism and finding out the rates over the last 20 years.
Varga-
We also suggested applying money spent on state agency bailouts to the unemployment deficit.
Stumpy-
Good question … but whether the rate was reduced in the past or not, any increase on business taxes at this time is a recipe for disaster.
-FITS
Come on FITS. The new plan will tax employers according to how much they drew out of UI over the last few years. The old system was a simple tax on the number of employees you had with no concern as to how much you took out. The new plan will tax employers based on how much they take from the system, not just how many bodies they have on the payroll. It is much fairer (and in line with most other states) than the current system and will not be a “job killer” like you have been suckered into believing.
I understand the tax bill will go up on about 2000 businesses (mostly temporary staffing firms, agricultural workers, and a handful of manufacturers). I don’t feel bad for them at all. The staffing firms built unemployment pay into their pay structure to allow their employees to maximize their compensation and time off. Many manufacturers used UI to pay their staff when they shut down for retooling etc. instead of making them use vacation. Ag usually was done on a contract basis until some of the growers learned they could game the system.
You will find a handful that this will hurt who weren’t trying to avoid paying their own way but the overwhelming majority are getting what they deserve.
But wasnt lowering those same taxes supposed to stimulate the economy???
So what you are saying is that lowering those taxes didnt stimulate the economy..
so there should be plenty of money in the businesses that benefitted from those tax cuts, now to pay back the money that they owe….
The fact that those business that used the unemployment benefit must now pay for that benefit is the way it SHOULD be.
These companies managers apparently slept through Management 101 (or never worked at a McDonalds) and didn’t learn how to whittle away the least producitve workers’ hours and benefits to the point where they just abandon their jobs.
Now if only the SC gubmint apparatus would learn how to “clean house” on a grand scale….
Fits,
If the money had been there (sort of like the rainy day fund all you Libertarians support), then we wouldn’t have had to borrow the money from the Feds. And as Joseph said, it didn’t work cutting these taxes because it didn’t stimulate jobs. These people that say they will move probably won’t because they can’t find cheaper labor.
SCGUY, you’re way off on your numbers.
There are 24,500 companies in the upper tiers, 13-20, of the new system. Those companies are paying higher rates than anyone has ever paid in SC. Meanwhile, 45,000 businesses get a BREAK on this tax, when our state is in a financial crisis because of this debt. That’s not fair, but beyond that it’s devastating companies that would be hiring people back as the economy recovers.
And, by the way, no company ever “drew out of UI,” as you characterize it. The people that companies let go — in most cases for sound, economic reasons — “drew” unemployment, because the state offered it and paid them whether they were qualified or not. THAT’s how we got into debt, not because companies “used” the system.
For those few that do “game” the system, shame on the ESC for not enacting and enforcing strict rules. But don’t penalize 24,000+ companies that are trying to run a business and be profitable for the transgressions of a few and a bad system.
Thanks FITS, for your on-target comments on this.
The problem is in the tiers I think. No one has come out saying that an adjustment didnt need to be made…and the state has been up front about the tens of millions of dollars the agencies ineptness (prior to the agencies revamp) has cost the state. If you look at tiers 1-12, they graduate up from NO INSURANCE cost to about 2.6%. Tier 13 jumps to 5.7%. So the jump in tier 13 is eaqual to the range of tiers 1-12. And each tier is simply a grouping of 5% of wages.
Look acrefully athe bill, the tiers and the graduation of rates. Should people abusing unemployment pay alot more? Yes. But man, I think SC implementing a tax increase like this without modeling the outcome and seeing wo would fall where was irresponsible.
FITS
Good thing you’re schilling for Lewis Gossett.
Do you not agree with fiscal conservatives like Ryberg and Haley. They’ve been the beacon of light as you’ve pointed out on numerous times from a taxpayer issue.
Since when do businesses pay taxes? The self employed are the only businesses that pay taxes. Everyone else has the tax rate figured into the cost of doing business…unless you’re a moron which we have plenty of those in SC with most of them residing in the state senate.
Capatalism has it’s cost.
I’m one of those evil business owners that had to lay people off as the economy has gotten worse.
I’m truly at a point where I don’t give a damn anymore. SC doubled my unemployemnt benefits tax….DOUBLED IT….right when my business is already in a tenuous position. And NO, I did not “abuse” the system…my business shrank…continuously. Govco decided to pay everyone laid off for two years…not me.
All this did was make up my mind on moving as much of it out of the country as possible. I’ve fought the good fight, let the buzzards pick over what is left…but I’m the one that keeps the doors open-not my employees-and that’s how it’s gonna remain even if I have to do it from Mexico.
The parasites will starve themselves eventually and maybe then I’ll come back.
Old bike dude, we’re not talking about income taxes, this is a tax on every dollar of payroll – it applies to any type of company, C or S or other.
And idiot, it’s not a matter of conservatism, it’s a matter of stupidity when they are trying to get the whole debt back from less than a third of the companies.
Finally, kick em, why don’t you call Haley and Ryberg and tell them. Maybe this too shall pass….
I do think that temp agencies should pay higher unemployment taxes than regular companies. There were lost of companies in SC that witheld increases, cut hours, ect but didn’t lay people off.
In my opinion, they shouldn’t have to pay the same rate as companies that lay people off at a drop of the hat because they know their people can go and sign up.
I hope everybody knows that temp companies mark up the wage they pay to their employees by at least 50% to cover for unemployment, workers comp, profit, etc. I think they are crying wolf here
Actually every employer is paying back the federal debt. The folks that used the system the least are paying a quarter of the debt. Pretty fair and reasonable.
Ditto the comment on plants shutting down and using the system to their benefit. Some manufacturers used UI for plant maintenance and some didn’t. Should they folks that didn’t have to pay for those that did?
Our company had an incredible increase in our rates. I am in accounting and we ran our numbers. Over the last 10 years we had a surplus of over 1mmm dollars paid into the fund. We did have a 40 person layoff in 2008. We found out we are in tier 17 and our rates went up over 200%. Plus they increased the rate cap over 40% to 10k.
Something is wrong here. And our management team knew nothing about it. We are a manufacturing company growing. There is talk now about adding the jobs in Georgia.
“Well, businesses across South Carolina are on the hook for $933 million worth of federal unemployment benefits paid out to workers who lost their jobs during the recession – a massive tab that state government is now trying to collect. In fact, Palmetto state businesses are currently being hit with huge tax bills in an effort to repay this debt and replenish our state’s exhausted employment reserve fund.”
When there were millions in the fund several years ago Sanfraud lowered and the legislature voted to LOWER THE EMPLOYER contribution WAY LOWER than it should have been. It was running deficite for SEVERAL YEARS prior to the 2008 downturn. They weren’t paying their fair share then because idiots like you thought it was a bad idea for them to pay. Now that the benefits have been paid out and the fund it depleted, idiots like yourself say “how did it get so low.”
The only thing you dittio heads have in common is that you know cutting taxes and insulting the government is popular. As for how to run things or what optimal tax levels might be and actually solving problems…not so much.
Kick ’em,
Don’t le the door hit your inept “I’m the one that keeps the doors open-not my employees” ass on the way to Mexico.
Vaya con Dios.
Whoopsy,
Mega dittos on your commentary.
This is an insurance system. It pays recipients so that money flows through the economy in down times and low employment. It’s a “common good” program, like public education, libraries, law enforcement, etc. You may never use it, but it’s for the common good.
It IS reasonable that every company pays something into the system. I’m not saying that companies with more layoffs shouldn’t pay more, but they shouldn’t pay ALL.
Companies don’t “use” the system. The whole economy does.
I have a staffing agency and our monies was cut by 3% (cltc & ddsn) off our profits and the ui was tripled… It’s like the guv is turning into the mob…what are we doing paying for “Protection” ?
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