Maryland Unemployment Tax To Increase By 50%

HERE is the letter explaining the increase to employers.

HERE is an Associated Press article saying how terrible the increase it, including a reference to local businessman (and friend of this blog) Chuck Ferrar.

As usual, I was ahead of the curve on this issue--not because I'm a good blogger--but because I own a business that will be heavily affected by this ridiculous increase.  I've been circulating a letter to whoever will listen for a few weeks, now, and now I'll share it with you.

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November 10, 2009

To Governor O’Malley, Legislators, and Whom It May Concern:

The purpose of this letter is to urge you to consider much-needed changes to unemployment laws in the state of Maryland. Specifically, I would like to express my anger at the outrageous shift in the rate tables for the upcoming fiscal year, and to outline the need for special consideration for seasonal businesses.

I am a lifelong Maryland resident and graduate of this state’s flagship University. In 2002, I started Gill Grilling Company to provide daily meal service to Fraternities and Sororities at the University of Maryland. Through hard work and sacrifice, a simple promise to provide food to a student who had none has turned into a thriving business. Gill Grilling Company has created literally hundreds of jobs in the seven and a half years we’ve been in business, and we currently employ 20 employees on a full-time basis—offering benefits rarely found in the hospitality industry: daytime hours, paid holidays off, paid vacation, supplemental insurance, and retirement IRA plans. Our efforts to provide value to the market and conduct business in a responsible manner were rewarded by the Small Business Administration, which awarded this company the distinction of “Young Entrepreneur of the Year” for 2003.

One problem with our business is its seasonal nature. Much like a teacher’s schedule, we only work during the typical “semester” time-frames during which normal classes are in session. During our lengthy breaks, our employees collect unemployment, causing our company to always be assigned the maximum unemployment rate allowed by law.

Currently that maximum rate is set at 9.0%, and this year-to-date my company has paid $16,935.37 to the Unemployment Insurance Fund. I recently received a notice that the maximum rate will be increasing to 13.5%. Much like the change in sales tax from 5% to 6% was not a 1% increase but rather a 20% increase, this increase in unemployment rates represents a 50% increase in taxation on businesses like mine. If we were to increase the cost to our customers by 50%, we’d be run out of business. The fact that the state of Maryland is willing to impose such an increased burden is appalling, and shows politicians’ ignorance of this fact: my company creates jobs. The private sector creates jobs. The $30,000 I will pay in unemployment taxes next year could be used to create jobs; to provide a valuable service; and to further increase the income tax base in our great state. The message to businesses is clear: the state of Maryland doesn’t understand the benefit its businesses provide, and is unconcerned with the burdens these policies impose.

Outside of the overall increase in rates, this company’s particular situation emphasizes the need for unemployment reform with regards to seasonal employers. Let me say that I understand the need for unemployment insurance and I support the philosophy in many situations. There will always be unexpected job loss due to illness, layoff, misfortune, and the like. The existence of unemployment insurance provides a needed buffer to families faced with such a situation, and I think that’s a great thing. However, unemployment loss should serve the interests of those who experience unexpected loss of employment. For companies like this one, employees claim unemployment benefits not because of a sudden event, but rather in the form of repeating conscious choices not to look for supplemental employment because they know they can get money without working. This practice has to stop.

I have spoken at length with officials from the Department of Labor, Licensing, and Regulation, and have been assured that the current regulations offer no relief to seasonal businesses. Several of my employees have chosen a year-round pay structure, but are still able to collect unemployment due to a clause that allows unemployment benefits to employees when physical work time is reduced, even if the employee is getting paid.

During my research of this issue, I came across the website for the Department of Labor of the state of Kansas. They advise “Unemployment insurance cannot solve the problem of joblessness. Only more jobs can reduce unemployment”. I will be a part of the solution. I will create more jobs. I just need your help to make it happen.

Thank you for your consideration and support.

Sincerely,
Brian Gill