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A 2% increase in MD's unemployment insurance rate will but some out of business

 I got a letter from DLLR (Department of Labor Licensing and Regulation) today telling me because of increased filings and costs that in 2010 my unemployment insurance rate will be increasing to 2.2%. I'm getting off lucky because the letter says some other employers will be getting theirs increased to 13.5%. This is from my 2009 rate of 0.9% but my 2009 was 3 times my 2008 rate of 0.3%. I'm a small company, I've never laid off or even fired anyone (few years ago raised the bar and had a bunch of people quit on me, and took an independent contractor off a website development but never ever fired or laid off a W-2 employee) so I get the lowest possible rate. Companies who have fired or laid people off and have UI benefits claims get the higher rates. This is a main reason why if you are ever fired don't sign anything your employer asks you to sign because it is a CYA form your employer is going to use to try and deny your UI claim. 

Anyways, how is such a small increase going to cut my profits by at least 10%? Payroll is my #1 cost, making up a little more than half of my total costs. My actual profit margin floats around 5-10%. This means an increase in payroll costs of 10-20% would put me completely in the red (10-20% of half=5-10% of the whole). It also means that a 2% increase in payroll costs will cut my profit margin from 5-10% to 4-9%, that's a 10-20% reduction attributed solely to the UI rate increase

So what does that really mean? It means 10-20% less growth. 10-20% less new hiring. 10-20% less new equipment purchasing. 10-20% less savings (remember one man's loan is another man's savings). What does it mean to a company that is already at break even? It means they are now in the red. What does it mean to a company that is already in the red? It means they are now giving very serious consideration to closing up shop and laying off EVERYONE. The magic of the payroll tax is that it taxes GROSS PAYROLL, NOT NET PROFITS and thus can push a company on the edge over it, or drop an anvil on one that already has fallen. Does anyone know anyone who has been on unemployment for an extended period of time and admitted that were it not for their UI benefits they would be looking for a job harder? I do. Does anyone see an Atlas Shrugged parallel here? I do. 

Whatever happened to personal pride? I remember billionaire Ross Perot saying he'd cut grass before he'd take a handout. I have to agree. I'd push a lawnmower and knock on doors, rent my entire house out and move into my own basement (backyard if need be), eat Ramon Noodles every night, and sell everything I owned before I took a handout. So much has become so big and so faceless that I guess people don't stop and think of who is actually paying for it. How many people are getting foreclosed on with 50 inch plasma screens, a closet full of fancy clothes, cable TV, internet access and cell phones? How many people are drawing some sort of government check with the same?