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Businesses could face unemployment insurance tax hike

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Now the country’s unemployment problem isn’t just hurting workers, it’s taking aim at businesses.

In at least 35 states, businesses will be faced with an unemployment insurance tax increase in 2010, in one state’s case a 600 percent increase, according to the National Association of State Workforce Agencies’ Unemployment Insurance Trust Fund Solvency Survey. (see the survey)

Businesses in Iowa have a projected increase of 50 percent in 2010, according to the report. That’s above the median increase of 27.5 percent, CNNMoney.com reported, but well below states such as Hawaii (600 percent), Nebraska (150 percent), South Dakota (140 percent) and Kansas (100 percent).

A majority of the tax increases happened automatically because high unemployment triggered state laws governing their unemployment insurance systems, but at least seven states voted to raise taxable wage bases and another 10 are considering upping the wage bases or tax rates, CNNMoney.com reported.

As a result of the Great Recession, which forced a record 26 states to borrow a total of more than $30 billion, states are struggling to replenish the unemployment insurance trust funds, CNNMoney.com said.

Because businesses pay taxes for each employee, the higher taxes can hurt the ability of businesses to hire new employees, which can slow the economic recovery, CNNMoney.com said. As a result, many states are hoping to ease the burden through legislation that would delay the tax hikes.