Taxes

Obama Hopes to Hand Leaky States a Bail

By Adam Sorensen | @adamsorensen | February 8, 2011 | +

President Obama’s upcoming budget proposal for fiscal year 2012 is expected to have some nips and tucks — a federal pay freeze, non-defense discretionary spending freeze, an earmark ban — but it’s not going to be unadulterated austerity. One area where the White House continues to show willingness to spend is aid to states struggling to balance their budgets in wake of a recession that cleaned them out.

As I mentioned this morning, Obama is expected to propose widening the range of wages on which companies must pay unemployment taxes in 2014. The Wall Street Journal explains:

By proposing to enlarge the pool of wages subject to unemployment taxes, the White House appears to be offering states a more politically palatable way to raise revenues than to boost tax rates. States could keep the tax rates they have, or even lower them somewhat, and still raise considerably more revenue than they are raising now.

Now the New York Times is filling out the story a bit. Obama and company will propose putting off the collection of interest from states who borrowed federal dollars for jobless benefits during the recession. That would take some weight off their budgets while they keep the unemployment aid flowing and prevent an automatic tax increase on employers for two years. The higher revenues in 2014 would then help states pay the feds back.

Bear in mind: All of this would require congressional approval. As it’s been in the past, Republican governors from seriously underwater states seem politically key here. Get them on board, dangle the tax moratorium in front of GOPers on the Hill, and the White House might be able to get the plan through.

Related Topics: Barack Obama, Democratic Party, Republican Party, Taxes

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  • hernandezusa

    Americans do NOT want more Welfare and Unemployment checks.

    ~ we want JOBS == JOBS

    ~ NO more importing of LEGAL workers will we are not unemployed in every state.

    ~ NO more ILLEGAL workers EVER!

    Do the both above will open MILLIONS of jobs for ALL Americans that are unemployed and Underemployed.

    Employing Americans will save the states, NOT WELFARE or continued unemployment!

  • http://shortplaysaboutrealpeople.wordpress.com Michael Maiello

    Why don’t we treat the states like we treat the banks and lend to them at a zero rate? Why even bother collecting later?

  • chupkar

    Talk to the Rs, who thus far, despite their criticism of Obama and promises, have sponsored repealing health care and two abortion bills. It’s not so easy to create jobs, me thinks, as everyone seems to think.

  • newfreedomblog

    “California, which owes $362 million in interest on a total debt of $9.7 billion, the highest in the nation, plans to juggle its accounts, borrowing from a trust fund for disabled workers to pay interest to the federal government.
    .
    In New York, which owes $115 million in interest on $3.2 billion, the cost will be passed on to employers in the form of a tax surcharge. Texas went to the bond market and borrowed $2 billion to pay back all the money it borrowed from the federal government, judging that the interest on the bonds, which are backed by a tax on employers, would cost less.”

    .
    From the article cited in the NYT, combined New York and California owe half of the amount borrowed. Excuse me?
    .
    What are the other States are in need of a bailout?

  • afguy

    Hey, I’m all for that.
    .
    Here in West Ky, most of those workers are employed at the local Pilgrim’s Pride® processing plant, gutting chickens on the night shift.
    .
    They are also involved in farming and tobacco related jobs that no one else wants to do.
    .
    Ever slaughtered chickens? I haven’t either, but watched my mom do it when growing up. You couldn’t have paid me ANY AMOUNT to do that at any point in my life.
    .
    Ever “suckered” and “wormed” tobacco? It’s nasty, back-breaking work. And no longer really economically viable.
    .
    Get rid of the “undocumenteds” here and people won’t rush to fill those jobs. They will either have to raise wages (so they will be attractive) and raise the cost of the product… or those activities will simply vanish.
    .
    Oh, and BTW, no health benefits, either.

  • newfreedomblog

    Sorry, not half, but almost a 1/3rd.

  • gysgt213

    America. Get this through your thick skulls. You are not getting a job. Business have no incentive or disincentive for creating or not creating jobs in the United States of America. They do have lots of incentive for sending jobs overseas. And anyone who dares to try and do anything about this will be branded a socialist, a communist, a anti-capitalist, violator of the constitution and as someone taking away from the American god given right to be unemployed and uninsured.
    .
    According to Forrester Research, over the next fifteen years over three million US service industry jobs and up to $136 billion in wages will move overseas to countries including India, Russia, China and the Philippines. Forrester also notes that 88% of the firms said they got better value for their money overseas and 71% said overseas workers did better quality work.
    .
    A Deloitte Research survey reports that the world’s 100 largest financial-services companies expect to transfer about $356 billion of their operations and two million jobs offshore over the next five years. “Offshoring is gaining momentum at a rapid pace,” says Christopher Gentle, a director at Deloitte Research.
    .
    On a similar note, Gartner Inc. predicts that one of 10 jobs in the computer services and software industry could move abroad by the end of 2004. It’s not just technology jobs that are leaving the United States. Jobs in just about every sector are going abroad including mortgage processors, claims adjusters, financial analysts, telemarketers and a variety of other job titles.
    .
    Overseas Offices
    .
    A computer industry acquaintance told me how his company had a office up and running in India in less than thirty days and how the salaries they were paying overseas workers were averaging $20,000 a year compared to a $100,000 for a United States employee.
    .
    Some of the companies moving jobs overseas include General Electric, Boeing, IBM, Microsoft, Citigroup, Hewlett Packard and ATT. Sprint is considering outsourcing hundreds of jobs and sending them offshore. It’s not only the private sector. Government agencies in 40 states and Washington, DC are using foreign workers staffing help desks to handle customer service for food stamp inquiries.
    .
    Protecting American Jobs
    .
    What can be done to protect American jobs? One suggestion is to remove tax incentives to American firms that are shifting jobs. Former presidential candidate, John Kerry, said in an AFL-CIO interview that “…companies move offshore simply to avoid paying American taxes, yet they still get all of the same benefits, including government contracts. We should penalize these companies and deny them government contracts.”
    .
    A NetworkWorldFusion article, quotes consultant Jack Heacock, who wonders whether the U.S. should impose tariffs on overseas call centers, “to better balance the playing field and the U.S. economy and information privacy.”
    .
    In addition, labor unions and technical worker alliances are lobbying Congress. While states, including New Jersey, North Carolina and South Carolina, are considering legislation to prevent tax-payer funded jobs from being shifted overseas.
    .
    http://jobsearch.about.com/cs/careerresources/a/offshore.htm

  • paulejb

    Adam Sorensen,

    You may be right that “Republicans” Arnold Schwarzenegger and Chris Christie would be on board with Obama’s plan for raising the cost of unemployment insurance to businesses, but they no longer have a say in the matter.

  • freeinpa

    “the White House continues to show willingness to spend is aid to states struggling”
    .
    Isn’t that how the states got into the shape they are in today. Taking handouts form the federal government and avoiding make the tough decisions on spending while believing the liberal spin that the stimulus would save the world by stopping unemployment at 8%.

    Lesson: Beware a Community Activist bearing gifts!

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