Fiscal Fallout: CA could face 3.7% payroll tax hike due to new audit findings
https://www.thecentersquare.com/california/article_abcd69d6-0edc-4a17-84c1-c6c7263fda97.html
Excerpt:
California is scrambling to avoid an automatic 3.7% payroll tax increase to cover its projected $23.2 billion debt to the federal government for COVID-era unemployment benefits payouts, according to information uncovered through a public records request by The Center Square.
With the California State Auditor reporting the state “materially misstated” the finances of its unemployment benefits fund, experts warn these detrimental findings — along with the fund’s growing and sustained deficits — could cause the state’s tax waiver application to fail. The increased payroll tax would stabilize the fund at the expense of workers, businesses, and consumers across the state.
“We saw in the State Auditor’s report — they have called them out for serious management for California’s [Employment Development Department] — inadequate controls, poor accounting in their UI payments, and just a systemic inability to verify benefit eligibility, that’s absolutely a detrimental action because you are failing to properly steward taxpayers’ money in these funds,” said Rachel Greszler, a senior research fellow at the Heritage Foundation, in an interview with The Center Square. “Hopefully it will be determined they do not receive yet another waiver, and they will have to be held accountable for their lack of proper management of the fund.”
California’s interest payments to the federal government on its growing UI debt are nearly $600 million for the ongoing 2025-2026 fiscal year, The Center Square reported in July. The payments are projected to grow to over $1 billion per year from the state’s general fund as benefits payments continue to exceed available funding. The state’s latest projections from May estimate the UI debt will grow by another $1.6 billion this year due to this imbalance.
The 3.7% credit reduction could generate over $3 billion in revenue, which would stabilize the state’s unemployment benefits fund if there is no surge in unemployment benefits claims.
However, according to an economic forecast by UCLA in June, California unemployment is expected to rise to 6.1% in 2025, and remain at 6% in 2026, which would put further pressure on the state’s unemployment benefits fund.
Normally, payroll taxes on wages are nominally 6%, but a tax credit of 5.4% is provided when the state does not have unemployment benefits debt to the federal government, resulting in an effective base rate of 0.6% on the first $7,000 of wages in federal unemployment benefits payroll taxes.
Under federal law, that 5.4% credit is reduced by 0.3% each year after the first two years the state has unemployment benefits debt to the federal government, which provides loans to states to fund unemployment benefits if the state’s benefits fund runs dry.
Upon the fifth year of unemployment benefits debt, the credit is further reduced by a Benefits Cost Rate surcharge, which California’s Employment Development Department — the agency managing the state’s unemployment insurance program — estimates would be 3.7%.
To secure a waiver substituting the 3.7% tax increase for a 0.3% tax increase, the United States Department of Labor California must demonstrate that it has not taken any detrimental actions to worsen the solvency of its unemployment fund......
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Commifornia democrats misstating the materiality of their unemployment benefits fund. Not surprised. More companies will leave.
Interesting note on the Judge assigned to the Comey case.
.......the judge, “randomly” assigned? A Biden appointee. Oh, and it gets better — his first job? Hired by James Comey.
https://www.americanthinker.com/blog/2025/09/james_comey_s_rigged_indictment.html
https://x.com/Anc_Aesthetics/status/1971444389676478916
I think this will likely be replicated in Ill-Annoy. The COVID-19 slush fund was like giving drugs to an addict. Gov Jelly Belly Prickster would happily raise taxes to cover his corruption....again.
Last I heard, CA is paying unemployment to inmates in the State and County prisons.
For the millionth time...Why to the voters/taxpayers put up with this horrible state government?