A state senator has urged Congress to intervene and relieve California’s financial burden by addressing a $20 billion debt that Governor Gavin Newsom and Democratic lawmakers have yet to settle. The call to action seeks to prevent employers from shouldering the financial responsibility.
Senate Minority Leader Brian Jones, along with fellow Republican state senators, has put forth a joint resolution appealing to Congress to halt impending federal payroll tax hikes. These increases are linked to California’s outstanding unemployment insurance (UI) debt.
According to the California Business Roundtable, employers in California are on the brink of facing a 5.2% payroll tax—nearly nine times higher than that of states that have resolved their debts. This financial strain is expected to hit small businesses particularly hard, as they make up 99.8% of the state’s businesses and employ 7.6 million people, according to information from Jones’ office.
“While other states have settled their debts, California has not,” Jones stated, emphasizing that businesses are unfairly bearing the burden due to what he describes as the state’s failure to address its financial responsibilities.
“Businesses that managed to survive shutdowns, maintain their workforce, and support their communities are now being penalized for Gavin Newsom’s shortcomings,” Jones added.
While most states chose to allocate federal stimulus funds to clear their unemployment debts, California opted to channel those funds into infrastructure, homelessness, and various other initiatives.
Jones’ measure asks Congress to stop raising federal unemployment taxes on businesses when a state’s own actions — like forcing shutdowns during COVID-19 or failing to prevent unemployment fraud — caused the debt in the first place.
Employers are expected to pay an additional $42 per employee in federal payroll taxes this year to help chip away at the debt, with the amount expected to rise annually until the balance is paid off.
“This is called the greatest hidden tax,” California Business Roundtable President Rob Lapsley told KCRA, warning that penalties tied to the debt could eventually exceed $400 per employee if the issue is not addressed.
Jones called out the state’s Employment Development Department (EDD) for paying out billions of dollars in fraudulent unemployment claims while real businesses were forced to remain shuttered.
The total amount of fraud is estimated to be at least $20 billion, according to the resolution.
“If you don’t pay a bill, you’ll get hounded by a collection agency,” Jones said. “But apparently if you’re the governor of California, you can ignore the tab and force someone else to pick it up.”
Newsom’s office did not immediately respond to a request for comment.In February, the U.S. The Department of Labor sent a letter to EDD announcing a “strike team” would be coming to the Golden State to root out theft and abuse similar to efforts in Minnesota.
