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Deal with the devil: Temporary across-the-board tax relief for more endless jobless benefits

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By Michelle Malkin  •  December 6, 2010 06:06 PM

I understand many Beltway politicos consider the Obama/GOP tax deal — to be announced at 6:10pm Eastern by the president — to be a “win” for Republicans because the White House has conceded much, including a temporary payroll tax cut holiday of one year that would bring down the workers’ portion of FICA/Social Security taxes by 2 percent from 6.2 to 4.2%.

But outside Washington, many small businesses are getting hammered by the bottomless government subsidies for the unemployed at the expense of struggling employers.

Take my home state of Colorado — where I’m getting inundated with e-mails and first-hand stories from restaurant owners, dentists, and other business people (many of whom employ low-wage workers) grappling with massive UI bills. We’re not alone here in the Rockies. Between 30-40 state unemployment funds are bankrupt or teetering on the edge. And small businesses are paying the price. I’ll be reporting much more on the problem in my syndicated column on Wednesday.

Via the Denver Post:

Businesses are being hit with large premium increases to prop up Colorado’s broke unemployment-insurance fund.

In notices that went out over the past two weeks, some firms are facing rates that have more than quadrupled from last year.

“I had to pick myself up off the floor after I opened the letter,” said Linda Greene, owner of Westminster-based Merry Maids North. Her first-quarter premium for 2011 will be $2,200, compared with $497 a year earlier.

“Money doesn’t just fall out of the sky, so I’m going to have to totally rework my budget and hope for the best,” said Greene, who employs 28 workers.

The Colorado Unemployment Insurance Trust Fund covers the cost of payments to jobless workers. Record numbers of unemployment claims caused the fund to go broke this year, forcing Colorado to borrow, so far, $368.5 million from the U.S. government.

At least 40 other states also are borrowing from the federal government to cover their fund deficits.

Colorado’s unemployment-benefit payments rose from $305 million in 2005 to $1.06 billion in 2009.

…In prior years, firms that never had laid off workers had relatively low premiums.

But for 2011, those businesses are facing big increases along with companies that have histories of layoffs.

Colorado labor department executive director Don Mares said many companies with higher claims histories already are near the state’s maximum rate of 5.4 percent of the first $10,000 a worker earns.

As a result, businesses with low claims histories are being required to pay higher rates to make up the deficit.

“This is a huge inequity,” said Chuck Mock, owner of a Longmont-based software-consulting firm. “If you keep paying into the system and don’t take anything out, that should be a good thing. But not in this case.”

Glad to see GOP Rep. Michele Bachmann expressing reservations about the impending deal. Via The Hill:

A House Tea Party leader said Monday that GOP lawmakers might vote down an extension of tax cuts if it’s tied to an extension in unemployment aid.

Rep. Michele Bachmann (R-Minn.), the chairwoman of the House Tea Party Caucus, said Republicans could balk at voting to extend all the tax cuts for two years if it’s tied to a long-term extension of jobless benefits.

“I don’t know that Republicans would necessarily go along with that vote. That would be a very hard vote to take,” Bachmann said on conservative talker Sean Hannity’s radio show on Monday.

President Obama is said to be amenable to extending all the tax cuts for two years as a concession to Republicans as long as unemployment benefits and certain tax breaks are extended as well.

Republican lawmakers have consistently opposed further extensions of unemployment benefits because, the GOP complained, spending on those benefits was not offset by cuts elsewhere in the budget. Democrats have argued that the spending on jobless benefits is an “emergency,” and doesn’t need to be paid for under “pay-go” rules.

The latest jobless benefits lapsed at the end of November, and securing a new, lengthier extension is one of the top bargaining chips for the White House, especially as both sides hope to close in on a deal.

But conservatives like Bachmann could scuttle the deal if enough defect from the party over spending concerns.

“I think we’re back in a conundrum. I think the compromise would be extending the rates for two years and not permanently, but not tying it to massive spending,” she said. “We cannot add on something like a year of unemployment benefits.”

***

If you are a small business owner with a UI horror story to share, e-mail me at writemalkin@gmail.com or leave comments below.

***

Previous: Well, well, well: Lib columnist discovers unemployed “gaming” jobless benefits

The unemployment benefits debate, Part IV

Paul Krugman, Cynthia Tucker, and the unemployment benefits debate, Pt. III

Sen. Bunning and the unemployment benefits debate revisited; Update: Senate votes 78-19, UI/COBRA extension/govt benefits bill passes, no pay-go; Update: Roll call vote added

Sunday morning on the Beltway roundtable circuit

***

The devilish details of the deal, via USAToday:

The outlines of the deal emerged from the White House and Republicans in Congress after Obama met with congressional Democrats late this afternoon. Those Democrats stressed that the deal isn’t final until they run it by their colleagues, probably on Tuesday.

Here are details of the emerging deal:

* Extends unemployment insurance for 13 months. Two million workers in December, and 7 million over the next year, would have lost benefits otherwise.
* Provides a one-year, 2% reduction in employees’ Social Security payroll taxes, lowering the rate from 6.2% to 4.2%, at a cost of $120 billion.
* Keeps the Earned Income Tax Credit and American Opportunity Tax Credit increases from last year’s economic stimulus law, for another $40 billion in tax cuts for families and students.
* Allows business to write off 100% of their capital purchases next year.
* Sets the estate tax at 35% for two years, with a $5 million asset limit that’s higher than last year’s $3.5 million.

Republicans in Congress endorsed the tentative deal. Rep. Dave Camp, R-Mich., who will chair the House Ways and Means Committee next year, said it “will allow us to extend all current tax rates and give economic recovery and job creation a chance. The failure to reach and pass an agreement preventing a tax hike would have been devastating for families, especially those who are still looking for work.”

Obama stressed that he didn’t like two elements of the deal — the temporary extension of tax cuts for upper-income Americans, which he said would have cost $700 billion if stretched for the entire next decade, and making the estate tax exemption more generous for the same time period.

Bottom line:

Tax relief = temporary. Jobless benefits = interminable.

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