In 2010, then-Speaker of the House Nancy Pelosi (D-CA) said that unemployment insurance “is one of the biggest stimuluses [sic] to our economy….It creates jobs faster than almost any other initiative that you can name.”
Unfortunately, Ms. Pelosi forgot that there is no such thing as a free lunch and employers end up paying higher taxes. As today’s Wall Street Journal notes, these higher taxes make hiring less likely:
“State and federal taxes are rising for employers across the U.S. as states struggle to repay federal loans for unemployment benefits, including more than $1 billion in interest due Friday.”
“The increases in state and federal unemployment-insurance taxes—paid primarily by businesses—are hitting as the recovery appears close to stalling, consumer confidence is low and unemployment remains high at 9.1%….”
“The higher tax tab could discourage hiring. ‘It’s just one more cost to add,’ said Douglas Devnew, vice president for finance and administration at Trumpf Inc., a Farmington, Conn., manufacturer. ‘Companies like ours are going to think that much harder if we need more folks.’”
“Many employers will face a second hit—higher federal taxes—if their states don’t pay their loan balances by November.”
The President’s latest jobs plan claims to relieve immediate tax hikes due to interest and penalties on Federal UI loans. But it does so on the backs of job creators by raising taxes even more in the future – imposing a net new tax hike of nearly $60 billion in the coming decade.