A potential consequence of the budget deficit in California is a rise in taxes for businesses. Due to the coronavirus pandemic, many people lost their jobs and funds, which states use to pay for unemployment benefits, ran out of cash. To continue paying these benefits, twenty-two states borrowed money from the federal government. Most of these states have already repaid the money, but California still owes $18.9 billion, making it one of the five states that has yet to repay. As a result, businesses will have to pay the money back through increased taxes. California should have started repaying the debt this year with $1.5 billion. However, due to the budget deficit of $22.5 billion, Governor Gavin Newsom now wants to cancel $1.25 billion of that spending to help address the budget shortfall. As a result, businesses will have to pay an additional $21 per employee in federal unemployment insurance taxes this year, and this tax increase will rise by $21 annually over the next ten years that the debt remains unpaid. According to the Legislative Analyst’s Office, it could take a minimum of ten years for businesses to repay the debt altogether. Even though California had a combined general fund budget surplus of $119.4 billion in the past two years, it did not use that money to pay down the debt, as it was focused on other things like stimulus checks and health care programs. The business community wants California to start repaying the debt to show they are serious about paying it down, but this seems unlikely, given California’s ongoing budget deficits.
Higher Taxes on California Companies Due to Unemployment Debt
- 6 May 2023
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Maxwell Thompson is a seasoned political correspondent who has covered elections, policies, and international relations for over a decade. With a degree in political science and a natural curiosity for global politics, Maxwell brings a unique perspective to his writing. In his downtime, he enjoys reading historical biographies and analyzing political trends.
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