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February 04, 2010

20,000 Reasons Not to Hire Someone

This is a pretty damning piece on one of the NYT blogs.

...Here’s how it works in Illinois...

...For each business, the state calculates how many dollars have been paid in compensation over the previous three years and adds on about 48 percent through various calculations. The result is that in Illinois, you end up paying for incremental compensation claims at a rate of $1.48 for every dollar that a former employee collects...

In the comments section there's a bunch of business owners relating their own horror show experiences with the unemployment tax. Many of these stories are so surreal and patently unfair it makes you just shake your head in shame that such injustices can happen on a large scale in the United States.

For the past decade or so we've been turning into a nation of 1099 "contractors" for those jobs where that sort of ploy is a viable option. As a practical matter, many of the vaunted "benefit packages" offered by large employers aren't worth much at all to younger or unmarried people without children anyway so going the 1099/contract route isn't that big a deal for them and has some distinct tax advantages when you're incorporated.

There was a German commenter on the piece who said the way we do UC was insane and clearly unfair to employers. After reading the piece, and the comments, I think I have to agree. The way it is now is completely insane. For many small businesses that have to scale back, the current system actually kind of encourages a business to simply fold up once a certain level of layoffs or firings occur just so the owner can get out from underneath the crushing UC taxes. If all your income is going back out the door as UC tax, there is little reason to continue. If you've still got some business out there worth pursuing, just fold, and open back up under a new corporation name with the same roster and no tax baggage of the past layoffs haunting you.

There should be incentives for them to soldier on, not say screw it and fold or resort to corporate musical chairs sleight of hand.


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posted by Purp at 12:14 AM

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