Efforts in Washington to block a requirement that some Michigan companies pay interest on their unemployment taxes have failed. Now some 54,000 companies in the state, including many construction companies, will have to pay the additional tax beginning this year.
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 passed by Congress.
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. It is to be paid once a year until the state’s federal debt plus interest is repaid, a date that will be officially determined later this year.
Even though the interest fee only affects companies with a negative balance (about 27 percent of all Michigan companies) that still adds up to some 54,000 companies. Construction companies are expected to be especially hard hit by this requirement with the seasonal nature of the industry combined with an extremely depressed market in recent years.
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 and industry groups have argued that paying the interest penalty could hurt efforts by companies to rebound from the recession.
MITA is joining forces with the Michigan Chamber of Commerce in the development of a study of Michigan’s Unemployment Insurance Trust Fund. Once completed, this detailed analysis will include economic models of proposed solutions to the many problems inherent in the current system.
If you have any questions or comments, please feel free to contact Mike Nystrom at mikenystrom@mi-ita.com, or Keith Ledbetter at keithledbetter@mi-ita.com or call the MITA office at (517) 347-8336.
