Hopefully, the editorial board of the Post-Dispatch will read the AP story they are running today, titled “Rising unemployment taxes could hinder hiring.” But we are supposed to look at taxes as an “investment,” according to the Post, rather than as a compulsory taking (a term I don’t automatically regard as a bad thing, but it’s a priori what taxes are), so the fact that higher taxes are actually a detriment to economic growth will no doubt be ignored. From the story:
Bruce Meyer, a University of Chicago economics professor, said his studies show that higher unemployment taxes usually lead to lower pay for employees.
My wife and I pay unemployment taxes on our children’s nanny, so I have some knowledge about this issue. Nationally, according to the article, unemployment taxes on businesses are rising dramatically. I don’t know what the average is in Missouri, but I just received my 2010 tax rate statement, and — if I recall correctly — the rate decreased slightly, as it is supposed to when you don’t fire anyone. What did rise for everyone, though, whether they have one employee or 10,000, was the taxable wage base. So, every employer in Missouri will owe unemployment taxes on the first $13,000 of wages next year, when last year it applied only to the first $12,500, and the year before to the first $12,000. That is a tax increase by another name. Now, is it so large that it will have a significant effect on hiring in Missouri? I don’t know, but probably not. The total tax increase on a $500 base hike is roughly $16, assuming the rate remains the same and basing it on our rate.
Just because I didn’t see a rate increase, though (with our family’s one employee and history of never firing anyone), does not mean that other companies that have been forced to lay off workers are not seeing a rate increase. If that is the case, the combination of a higher rate and a higher base could clearly influence hiring decisions statewide. But I need a little more research before I know the answer to that. As it is, I am just happy that the Post carried a story about the detrimental effects of taxation.
