Wednesday, November 25, 2009

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.


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.

Brian Gill


Anonymous said...

Do you thing O'Malley cares about your business. He knows that as a small business owner in Maryland chances are good you didn't and would never vote for him. He is going to keep lining the pockets of the lazy deadbeats that live off those of us who work and pay taxes.

Anonymous said...

Tax and spend. No surprise there. The State's letter makes it sound like the money is running out.

Sure, it is depleted and down to $300 million from $800 million, but they don't say that there are still contributions coming in from the employees who are still working and their employers.

They don't say that the $300 million in the trust fund is earning (probably) $15 million in income each year.

Let the trust fund whittle down and keep the rate where it is so that businesses can continue to employ people and contribute to the system.

Peter said...

When employment picks back up, are they going to lower the rate? Not as long as O'Malley, Miller and Busch are in office. Crossing the border to business-friendly Virginia is looking good to a lot Maryland businesses now.

Anonymous said...

How much do your employees collect in unemployment insurance each year?

Brian Gill said...

I'm not sure of the benefit amounts, but I know that the benefits they receive are more than the amount in taxes that the company pays.

In other words, other businesses subsidize our business in the terms that they may pay more in taxes than their employees receive in benefits, whereas we are the opposite.

Now, of course, I'm happy that we don't pay the full amount. I'm not trying to advocate that we pay more; rather, that the benefit structure be reexamined.

Because we are a seasonal business, our employees always collect unemployment and we always pay the maximum rate. Teachers cannot collect unemployment, but our workers on an exact teachers' schedule can collect. Bus drivers employed by the county cannot collect unemployment, but their counterparts working for private bus companies can collect. The idea of a 'spontaneous safety net' is now a 'planned hammock', and rather than the government treating private companies how they treat their own employees, they apply a different standard that results in a huge competitive disadvantage. If these reforms are addressed; if the government gets out of the way, people like me can do what we do and create jobs.

Anonymous said...

"In other words, other businesses subsidize our business in the terms that they may pay more in taxes than their employees receive in benefits, whereas we are the opposite."

And that seems to be the problem. Your employees need to get off the dole when they've been laid off for the season.

Brian Gill said...

Yes that's exactly it. The letter from DLLR cites an increase in "demand":

"While Maryland's trust fund has been able to weather the economic storm better than the funds in many states, as of September 30th its balance fell to $301.7 million, down from $895 million a year earlier. The reason for the decrease is straightforward: we have seen unprecedented demand on the Trust Fund."

I hate the use of the word 'demand' because it implies a free market service. There is nothing free market about taxes. The reason that "demand" for unemployment benefits has increased (outside of the general economy) is that Maryland has allowed more people to qualify for benefits:

The incentive needs to be changed to encourage people to 'get off the dole' rather than get something for nothing.