LANSING – Efforts in Washington to block a requirement that some Michigan companies pay interest on their unemployment taxes failed, and some 54,000 companies in the state will have to pay the additional tax beginning this year.
Stephen Geskey, director of Michigan’s Unemployment Insurance Agency, said in an interview he hoped the issue of eliminating or at least delaying the interest payments is not dead since it will eventually affect 31 states.
Michigan is the first state that has to pay the interest because it was the first state forced to borrow from the federal government to pay unemployment benefits. The required interest payments were delayed from 2009 through 2010 as part of the federal stimulus package that Congress passed.
U.S. Sen. Debbie Stabenow (D-Lansing) was heavily involved in efforts to win a further delay, or repeal of the interest payments last month, assisted by a number of Michigan business organizations. Officials hoped the delay could be tied into legislation extending income tax breaks and unemployment benefits for those whose benefits would otherwise have run out. But the efforts fell through.
Geskey said he did not know when support for the delay would “galvanize.”
Only companies that have a negative balance on their unemployment accounts, in other words, those companies that have laid workers off, will be assessed the interest payments.
The payments will be $67.50 for each of an affected company’s workers, paid once a year.
The fee is expected to raise between $45 million and $50 million a year, but Geskey said that still would not be enough to cover the interest payment the state owes. Until a final determination is made on the interest rate the state will be assessed, Geskey said he does not yet know how much the state’s required interest payment will be. That interest calculation is expected later this month.
Even though the interest fee only affects companies with a negative balance, or about 27 percent of all Michigan companies, Geskey said, that still affects some 54,000 companies.
The interest payment comes on top of an additional penalty tax of $42 a worker each company in Michigan has to pay regardless of whether they have laid workers off or not.
Business groups had argued that paying the interest penalty could hurt efforts by companies to rebound from the recession.
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