Ohio employers face another tax hike in 2014 to help pay off the state’s unemployment-compensation loan from the federal government.
The federal employment tax paid by employers was bumped up for the third time beginning Jan. 1, under an automatic repayment system for states that have failed to repay their debts. This increase, plus two previous ones, will cost employers an additional $63 per employee this year, according to Ohio’s Department of Job and Family Services.
Employers pay state and federal payroll taxes to fund jobless benefits. But without sufficient reserves when the recession hit, Ohio and 35 other states were forced to borrow from the federal trust fund to continue paying benefits to unemployed workers.
Ohio began borrowing in January 2009, with the state’s debt peaking at $2.6 billion.
The debt is down to $1.55 billion after several state payments on the principal totaling $1.3 billion and reductions in federal employer tax credits in each of the past two years that generated $276 million applied to the balance.
According to the U.S. Department of Labor, Ohio is among 15 states and the Virgin Islands owing a combined $20.5 billion. Ohio’s $1.55 billion debt is bigger than that of all but three of the others: California ($9.7 billion); New York ($3 billion); and North Carolina ($1.8 billion).
Under the repayment system, the tax credit on federal unemployment taxes paid by employers is reduced 0.3% each year, effectively increasing the amount they must pay. Ohio’s credit has now been cut three times, for a total reduction of 0.9%.
Concerned about the impact on businesses, some House Republicans want to use the state’s estimated $404 million savings from the federally funded expansion of Ohio’s Medicaid program to pay down the debt.
Rep. Dave Hall, R-Millersburg, recently introduced a bill that would require the savings be applied to the principal of Ohio’s loan, which would reduce the debt by nearly a third. The legislation, House Bill 329, has 14 co-sponsors.
Other legislators have suggested using the Medicaid savings to reduce state taxes, while some have proposed using it to restore state aid to local governments that was reduced during the recession.
Alternatively, Democrats last year proposed tapping the state’s rainy-day fund to pay down the unemployment-compensation loan.
The federal employment tax paid by employers was bumped up for the third time beginning Jan. 1, under an automatic repayment system for states that have failed to repay their debts. This increase, plus two previous ones, will cost employers an additional $63 per employee this year, according to Ohio’s Department of Job and Family Services.
Employers pay state and federal payroll taxes to fund jobless benefits. But without sufficient reserves when the recession hit, Ohio and 35 other states were forced to borrow from the federal trust fund to continue paying benefits to unemployed workers.
Ohio began borrowing in January 2009, with the state’s debt peaking at $2.6 billion.
The debt is down to $1.55 billion after several state payments on the principal totaling $1.3 billion and reductions in federal employer tax credits in each of the past two years that generated $276 million applied to the balance.
According to the U.S. Department of Labor, Ohio is among 15 states and the Virgin Islands owing a combined $20.5 billion. Ohio’s $1.55 billion debt is bigger than that of all but three of the others: California ($9.7 billion); New York ($3 billion); and North Carolina ($1.8 billion).
Under the repayment system, the tax credit on federal unemployment taxes paid by employers is reduced 0.3% each year, effectively increasing the amount they must pay. Ohio’s credit has now been cut three times, for a total reduction of 0.9%.
Concerned about the impact on businesses, some House Republicans want to use the state’s estimated $404 million savings from the federally funded expansion of Ohio’s Medicaid program to pay down the debt.
Rep. Dave Hall, R-Millersburg, recently introduced a bill that would require the savings be applied to the principal of Ohio’s loan, which would reduce the debt by nearly a third. The legislation, House Bill 329, has 14 co-sponsors.
Other legislators have suggested using the Medicaid savings to reduce state taxes, while some have proposed using it to restore state aid to local governments that was reduced during the recession.
Alternatively, Democrats last year proposed tapping the state’s rainy-day fund to pay down the unemployment-compensation loan.
