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A state senator is urging Congress to intervene and relieve California of a burdensome $20 billion debt, which has so far been left unaddressed by Governor Gavin Newsom and Democratic legislators. The plea is to prevent employers from shouldering the financial responsibility.
Senate Minority Leader Brian Jones, along with fellow Republican state senators, has introduced a joint resolution that calls on Congress to halt impending federal payroll tax hikes linked to California’s outstanding unemployment insurance (UI) debt. This move aims to protect businesses from bearing the brunt of the financial shortfall.
Without intervention, employers in California are poised to face a 5.2% payroll tax, significantly higher than the rate in debt-free states. The California Business Roundtable highlights this disparity, emphasizing the potential strain on small businesses, which represent a staggering 99.8% of all businesses in the state and provide 7.6 million jobs, as noted by Jones’ office.
Jones expressed his frustration, stating, “Every other state has managed to settle its debts, but California has not.” He criticized the administration for passing the financial burden onto businesses, which he believes have already endured enough by surviving shutdowns, maintaining payrolls, and supporting their communities through challenging times. “Now, these businesses will pay for Gavin Newsom’s shortcomings,” he added.
“Now, businesses that survived shutdowns, kept employees on payroll, and held their communities together will pay for Gavin Newsom’s failures.”
Most states used federal stimulus funds to pay down their unemployment debts, but California instead directed money toward infrastructure, homelessness and other priorities.
Jones’ measure asks Congress to stop raising federal unemployment taxes on businesses when a state’s own actions — like forcing shutdowns during COVID-19 or failing to prevent unemployment fraud — caused the debt in the first place.
Employers are expected to pay an additional $42 per employee in federal payroll taxes this year to help chip away at the debt, with the amount expected to rise annually until the balance is paid off.
“This is called the greatest hidden tax,” California Business Roundtable President Rob Lapsley told KCRA, warning that penalties tied to the debt could eventually exceed $400 per employee if the issue is not addressed.
Jones called out the state’s Employment Development Department (EDD) for paying out billions of dollars in fraudulent unemployment claims while real businesses were forced to remain shuttered.
The total amount of fraud is estimated to be at least $20 billion, according to the resolution.
“If you don’t pay a bill, you’ll get hounded by a collection agency,” Jones said. “But apparently if you’re the governor of California, you can ignore the tab and force someone else to pick it up.”
Newsom’s office did not immediately respond to a request for comment.In February, the U.S. The Department of Labor sent a letter to EDD announcing a “strike team” would be coming to the Golden State to root out theft and abuse similar to efforts in Minnesota.