Massachusetts To Hike Business Taxes To Make Up For Rise In Unemployment Benefits Claims

November 19, 2008 8:35 a.m. EST

Boston, MA (AHN) - Massachusetts will increase business taxes to fund the rise in unemployment benefit claims which is expected to reach $270 million in the next two years.

With the state unemployment rate, which reached 5.3 percent in September, expected to go up further to 6 percent next year until 2010, unemployment taxes on businesses are also expected to increase by about 8 percent or $51 per worker to $621 for every employee in 2009.

In 2010, unemployment taxes are expected to continue its upward adjustment to 10 percent or $60 additional per worker to $681.

While it will definitely be heavy on the finances of businesses in the state, the tax hikes are less compared to 2004 when the increase averaged 60 percent to $250 per employee to replenish the trust fund that pays unemployment benefits.

The 2001 recession depleted the coffers of the trust fund that Massachusetts had to borrow $600 million from the federal government in 2004 and 2005 with zero interest. In 2003 the state legislature introduced a mechanism which automatically hiked business taxes based on a schedule when a rise in unemployment siphons money from the fund.

Suzanne Bump, state Secretary of Labor and Workforce Development, said despite the large withdrawals in the unemployment fund as more Massachusetts workers are laid off and file benefit claims, the fund is expected to remain solvent until the end of 2009.