Big or Small, UI Tax Hike is Bad News

When the Indiana General Assembly passed legislation to increase unemployment insurance (UI) taxes by more than $700 million over the next two years, Senate Republican leadership claimed it was an effort to protect small businesses from paying the way for larger companies.

Too bad the size of a company has nothing to do with its UI taxes. The determining factor is a company’s unemployment history.

The current tax rates range from 1.1% to 5.6%. In 2009, the average company paying the 1.1% minimum has 17.3 employees. The average company paying the 5.6% maximum has 15.8 employees.
Yes, some companies at the current 1.1% rate will see a reduction in unemployment taxes from the current $77 per employee. In 2011, that reduction will be a miniscule $2 per employee.
More significantly, some employers will go from the lowest rates to the highest. There will be companies paying 1.1% on a $7,000 wage base ($77 per employee) in 2009 that will pay 9.5% on a $9,500 wage base ($902.50 per employee) in 2010. That is an unconscionable 950% tax increase.
Calculate your company’s tax increase here. Big or small, it is the last thing needed at this time. It’s bad enough that it has been enacted; trying to pass it off as a benefit for small business is ridiculous.