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Posted at 3:28 PM ET, 08/17/2010

Lay off workers, pay more taxes. Reverse. Repeat.

By Paige Winfield Cunningham

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.

By Paige Winfield Cunningham  | August 17, 2010; 3:28 PM ET
Categories:  HotTopic, Local blog network, Virginia, economy  
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Comments

Thank you for pointing this out, but what is a solution to this other than improving the economy ?

Posted by: Falmouth1 | August 19, 2010 6:20 AM | Report abuse

Get information on how to reduce your debt by filing for bankruptcy http://bit.ly/cpmRHo

Posted by: dalejohn19 | August 19, 2010 7:14 AM | Report abuse

I have a small business in Maryland and layed off one worker. My Unemployment tax went to $518 per employee. Over double what it is in Virginia. With corporate taxes higher in Maryland, this is another reason to move the business to Virginia.

The tax money I would save could let me invest more in my business.

Why would a small business want to operate in Maryland.

Posted by: rtuchman | August 22, 2010 11:30 AM | Report abuse

$45,000 per worker for Lockheed Martin good; $123 per unemployed worker bad--that's the take-home message her.

Let's see if I get your point, Ms. Cunningham. According to your figures, Va. employers now have to pay $123 more per year per worker for unemployment taxes. That works out to 33 cents per day per worker, and for that HUGE amount, an employer would be FORCED to lay her off?

SERIOUSLY?????????

I essence, those employers would be saying, hey worker, sorry, you aren’t worth 33 cents more a day. Goodbye.

The constant whining about taxes from businesses has gone beyond tiresome to completely ridiculous.

I also am puzzled about why Old Dominion Watchdog, dedicated to promoting "responsible government" considers it bad government to help workers experiencing long-term unemployment in large part due to the bad actors of Wall Street and big business.

I guess it's okay for Gov. McDonnell to use $12-$14 million of taxpayer money to bribe Lockheed Martin to locate where they would have located anyway, at a cost of $45,000+ per job created, but borrowing the equivalent of $123 per worker per year for unemployment benefits is bad.

Posted by: cr1957ny | August 22, 2010 12:12 PM | Report abuse

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