Lay off workers, pay more taxes. Reverse. Repeat.
Lay off workers, pay more taxes. Pay more taxes, lay off more workers. Repeat.
An irony has been cycling through Virginia's economy lately.
The number of Virginia businesses filing for bankruptcy doubled between 2007 and 2009. When these companies close their doors, they leave behind laid-off workers -- and their compensation needs. That prompts higher taxes on remaining companies to beef up Virginia's unemployment trust fund.
Additionally, the more of its own workers a company lays off, the more it has to pay into the fund.
The problem is, these triggers are not enough to keep the fund stocked in hard times. When Virginia's unemployment fund ran dry a year ago, the state borrowed $347 million from the federal unemployment fund to restock it. Legislators say we'll have to borrow more next year. The state has to pay not only that money back, but also $20 million in interest it has racked up.
And more taxes are the last thing businesses need when they're trying to weather a recession. In 2008, Virginia employers paid into the fund an average of $99 for each employee. That’s risen to about $170 this year and is projected to reach $222 next year.
The cycle goes like this:
The more people are laid off, the more file for unemployment. As the unemployment fund is drained, it triggers higher unemployment taxes on businesses. As businesses pay higher taxes, it’s harder for them to avoid more layoffs.
So on one hand, we have a dwindling unemployment fund. On the other, its suppliers are struggling to get by themselves.
Of course, this is just one of the troubles the big, bad recession wolf has laid on our doorstep. And considering that 31 other states have also borrowed federal dollars to write unemployment checks, we can make ourselves feel better by peering over the fence.
Paige Winfield Cunningham is an investigative reporter and managing editor at Old Dominion Watchdog. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.
Paige Winfield Cunningham
| August 17, 2010; 3:28 PM ET
Categories: HotTopic, Local blog network, Virginia, economy
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