Sharp Insurance Spike To Hit Florida Businesses These days, small businesses are getting a tax break from the federal government. But many states are preparing to impose big tax hikes by increasing unemployment insurance premiums. In Florida, business owners could see as much as a 1,200-percent increase.
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Sharp Insurance Spike To Hit Florida Businesses

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Sharp Insurance Spike To Hit Florida Businesses


Big retailers aren't the only ones struggling. It's been a tough year for many small businesses, too. And with 2009 drawing to a close, many business owners are about to get hit with huge tax hikes in the form of unemployment insurance.

From Miami, NPR's Greg Allen has this report.

GREG ALLEN: In Florida, unemployment benefits top out at just $300 a week. But for someone out of a job, the money can be a godsend. Congress extended jobless benefits as part of the stimulus package and is now considering passing a second extension.

In Florida now, nearly 700,000 people are receiving unemployment benefits, and for employers it comes with a cost. Employers like Kevin Rusk who makes and sells beer at Titanic Brewery and Restaurant in Coral Gables.

Mr. KEVIN RUSK (Owner, Titanic Brewery and Restaurant): This particular one here is Captain Smith's Rye. That beer is the only beer in the state of Florida to ever win a World Beer Cup Award. So I'm really proud of that, and we sell the schnockers(ph) out of it.

ALLEN: Rusk is one of the thousands of business owners statewide who soon will receiving a notice that his unemployment insurance premiums are rising, in fact, skyrocketing. The minimum rate for employers with few claims, which was $8, now is leaping to over than $100 per employee. That's left business owners like Rusk with sticker shock.

Mr. RUSK: In my business, if I said I was going to increase the price of a burger, I can increase it 5 percent, 10 percent, you know? They didn't do that. They increased it 1,200 percent and that's just a sour pill for most people to swallow.

ALLEN: Florida's unemployment rate is just over 11 percent - above the national average. With so many people out of work, the state's unemployment fund, which a year ago had a $1 billion surplus, was quickly depleted. A few months ago, Florida began borrowing money from the federal government. And at the same time, an automatic trigger kicked in, dramatically increasing premiums paid by business owners.

With 30 employees, Rusk's annual premiums rose from a few hundred to more than $3,000. Unemployment insurance has suddenly gone from negligible to a noticeable expense; one that he says may affect business decisions.

Mr. RUSK: I can't say that I wouldn't hire another person, but I'll think a little harder than I would've before.

ALLEN: That's the impact economists and policymakers are worried about - that this rising cost of unemployment insurance will cause business owners to tighten their belts, just as the recession appears to be easing.

Rick McAllister heads the Florida Retail Federation.

Mr. RICK MCALLISTER (President/CEO, Florida Retail Federation): Businesses are beginning to feel a little better about the light at the end of the tunnel, and we don't want them to think now that that's a train. It's a psychological defeat that would be a jobs killer and a recovery killer for the State of Florida.

ALLEN: No one is suggesting that unemployment benefits should be cut. But Florida's Retail Federation is asking legislators in Florida to put the tax increase on hold for at least a year, while businesses get back on their feet and the economy improves. Because of the automatic trigger that kicked in, raising unemployment premiums, Florida is one of the first states to feel the pain. But it soon will have lots of company.

About 25 states have depleted their funds and turned to the federal government for loans, borrowing some $15 billion. The Department of Labor expects those numbers to grow, to include 40 states and some $90 billion in loans before the jobless picture improves. That's all money that will eventually have to be paid back by business owners through higher unemployment insurance premiums.

Rich Hobbie is with the National Association of State Workforce Agencies. He says in many states the crunch will come in two years, when it's time for the states to begin paying back the federal loans.

Mr. RICH HOBBIE (National Association of State Workforce Agencies): 2011 will be when most of the states that have borrowed will be facing an increase in their federal unemployment tax. And that, coupled with the increases in state unemployment taxes, will really get the interest of employers, and they'll start to advocate for change.

ALLEN: Currently, the federal government loans to the state's unemployment funds are interest-free. As the states come to grips with this problem, pressure is likely to build on Washington to extend the program or make other concessions, shifting at least temporarily the rising cost of unemployment insurance from businesses to the federal government.

Greg Allen, NPR News, Miami.

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