Businesses Paying for Government’s Irresponsibility

April 1, 2014

Connecticut still owes more than $573,439,548.60 from the federal government to pay for unemployment liabilities. For the third year in a row businesses got the letter they dread from the Connecticut Department of Labor “special assessments” are due.

These assessments are basically a hidden tax on businesses. The money collected helps pay tens of millions of dollars in interest Connecticut owes the federal government. In addition to interest costs, Connecticut and other states with federal loans outstanding for two consecutive years must make additional payments into the Federal Unemployment Tax Act (FUTA) system to pay down the loan principal. This year the FUTA tax rate will increase by 0.9%.

For businesses like Joni’s Childcare in Harwinton it is a bill they are not happy about. It is estimated Joni’s will have to pay more than $6,000 in this hidden tax. The owner recently sent an email to government leaders expressing his concern.

Please stop the insanity. This is the third year that we have been assessed an unemployment penalty because you decided how best to spend our money. The amount below is enough to give seven of our employees a $0.50 an hour raise instead they will get much less.

We pay our people from $9 to $12 per hour but it is hard to continue this or to pay more thanks to your generosity with our money.

Being late with loan repayments is also not good for our state’s financial credit. The state of Connecticut is considered a FUTA Credit Reduction state.

What is a credit reduction state?

A state is a credit reduction state if it has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allowable time frame.

A reduction in the usual credit against the full FUTA tax rate means that employers pay more for the state’s irresponsibility.

Unemployment in Connecticut is at 7.4% still above the national average. We are not adding new jobs at the pace the rest of the country is enjoying. There are 23,500 less residents employed now than when Governor Malloy took office.

Average weekly pay for private sector employees is down -2.8% from last year. Average hourly earnings are down 31 cents from 2012. And people are working less than 40 hour work weeks in the private sector.

When will government learn it can’t create jobs but certainly knows how to destroy them?
You can find out more about this hidden tax by visiting: