Unemployment Tax Increase

Alabama businesses will get stung at the first of the year when the tax they pay to cover the state's cost for unemployment benefits goes up. In some cases the tax could almost triple.

The state is trying to cover a debt of about 140 million dollars to the federal government, money Alabama borrowed to continue paying unemployment benefits to some 75 thousand out of work people.

The lowest unemployment tax rate will rise from $64 per employee in 2009, to $172 per employee and could be as high as $664 per employee, depending on the business, how many employees it has laid off who are collecting benefits--and other factors.

But many businesses say it may also have them re-thinking plans to hire new employees. Ralph Paul of Cottage Hill Ace Hardware says, "It will definitely affect hiring. I feel like its actually going to back the state up--instead of paying off that debt they're going to wind up with having to pay more unemployment out," he says.

Others say while it will increase the cost of hiring new employees, ultimately that cost will be passed on, increasing the cost of doing business.

"The bad news is its going to cost us more to hire them therefore the price of business goes up so you begin to lose a competitive edge," says Tommy Lawshe of Bagby and Russell Electric.

Alabama employers pay the tax on the first $8000 employees make.