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Will Higher Unemployment Taxes Lead To Higher Unemployment?

Employers in Texas are facing a steep increase in the amount of unemployment insurance tax they’ll have to pay next year.

As David Pitman reports, once local observer who is closely involved in helping people find work doesn’t believe the higher tax will result in employers laying off more workers.


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The unemployment rate in Texas has been above eight percent for the last three months, and with so many Texans losing their jobs during the recession, the unemployment trust fund has fallen below the mandatory level of 860 million dollars — which about one percent of all taxable wages in the state.

That means employers next year will have to pay an extra one-billion dollars in taxes to support the fund.  That’s twice what they paid this year.

“I don’t think it’s going to have a massive impact on employment.  Of course, it’ll have an impact — whenever you charge more money, the money has to come from somewhere.  But I don’t see it being a devastating blow to the employment market.”

Jamie Belinne is the Assistant Dean for Career Services at the Bauer College of Business at the University of Houston.   She says a lot companies made deeper cuts than they absolutely needed to at the beginning of the recession, which is why she believes the higher unemployment tax should ‘not’ have a tremendous effect on hiring.

“We’re starting to see things turn up a little bit, so, in a way, this increase in the taxing could just balance out their expectations for decreased orders and things like that in this fiscal year.”

The officials who oversee the state’s unemployment fund say they tried to lessen the impact to employers, by spreading out the tax increases over three years.