Taxes going up for local businesses

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SALT LAKE CITY -- Bad news for Utah businesses, another one of their taxes is going up next year.

Job losses cut into the state's Unemployment Insurance Trust Fund and most employers will pay twice as much next year to keep that fund solvent.

As unemployment rises, more workers draw unemployment benefits from the Utah Unemployment Insurance Trust Fund. As that fund diminishes, a formula kicks in, and employers must pay more to replenish the fund.

That's not good for business, but Utah is better off than 32 other states, where the funds are insolvent.

"We're just trembling on the edge of our employee costs being so great that we can't even run a business," said King's English Bookstore owner Betsy Burton.

This year Burton paid around $600 to the Unemployment Insurance Trust Fund. Next year, her rate doubles, so she will pay $1200.

"So when the state does something like this," Burton said. "It could very well tip a small business over the edge."

Prior to the recession, Utah paid out around $100 million a year in unemployment benefits. Now it's closer to $400 million.

Unemployment Insurance Manager Bill Starks says an employer's contribution is based on taxable wages, set in Utah code.

An employer with a lot of layoffs, or seasonal workers pays a higher rate, because those workers draw more benefits from the fund.

For 2011, the minimum rate will rise from .2% to .4%, and that's what 63% of Utah business will pay, a rate similar to the 2005 and 2006 minimum rates. 27% of all business, however, will pay rates from 1% up to 9.4%, the maximum rate.

"Utah has one of the more solvent unemployment trust funds," said Starks. "And a lot of that is frankly attributable to our rate formula."

"Raising taxes is going to inflict some costs on firms, and may even cause some unemployment," said BYU economist Richard W. Evans. "But, Utah is very well-positioned fiscally."

30,000 letters on the rate change have gone out to businesses already, 40,000 more will soon get their letters. Businesses won't write their first checks on the new rates until April.



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Jed Boal


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