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California companies pay higher taxes for unemployment debt

By Eric Sterling
Published in Financial Planning
May 04, 2023
1 min read
California companies pay higher taxes for unemployment debt

So, I just read this article about how companies in California are paying higher taxes because of unemployment debt. Basically, when businesses lay off employees and those employees file for unemployment, the state pays them benefits out of a trust fund. But if that fund runs out of money and the state has to borrow from the federal government, companies are then required to pay higher taxes to pay back the debt.

It’s a pretty interesting issue to me because I used to work for a startup company in California that went through a period of layoffs. I remember our CEO emphasizing how important it was to be cautious with layoffs because of the potential consequences for the company’s tax rate and financial stability.

According to the article, California is one of 11 states that currently owes the federal government millions of dollars in unemployment debt. And while the pandemic has certainly played a role in increasing layoffs and therefore driving up this debt, it’s also a long-standing issue that companies have been grappling with for years.

Overall, this article serves as a reminder that even seemingly small decisions within a business can have larger financial implications, especially when it comes to government regulations and debt. It’s important for businesses to be aware of these potential consequences and to work towards finding solutions that benefit both the company and its employees.

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Eric Sterling

Eric Sterling

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