Overview
Through federal and state cooperation, unemployment insurance (UI) benefits act as a stabilizer during economic downturns by being the primary source of temporary, partial wage replacement for workers who have been laid off and are looking for employment. To induce states to enact UI laws, the Social Security Act of 1935 provided a tax offset incentive and authorized grants to states to meet the costs of administering the state systems. Employers receive an offset against federal taxes if state UI programs meet certain requirements. Unemployment Insurance 
Position
Unemployment Insurance
The CalChamber believes that the best way for California to combat rising unemployment, and therefore improve the stability of the UI Trust Fund, is to improve the business climate in California. California ranked as the sixth worst business climate in the United States in the Milken Institute’s 2007 Cost-of-Doing-Business Index. California’s business climate continued its decline to be one of the worst, as indicated by several indicators: the Council on State Taxation reported in its Business Tax Burden Study that California’s corporate income tax rate is double the national average; the Tax Foundation’s 2011 State Business Tax Climate Index ranked California 49; Forbes’ 2010 Best States for Business ranked California 38 overall, and 44 for business costs; and in CEO Magazine’s Best and Worst States for Business, for the third straight year, California came in last (51) . The Small Business and Entrepreneurship Council, for the last four years, has ranked California at 48 or 49 among the states for its costs and burdens of government on small businesses.
The California Legislature has made a series of public policy choices that has led to California having a high cost of wages, a high tax burden, excessive power costs and expensive commercial property. Any “fix” for the UI fund has to include a series of policy changes that will improve California’s business climate and spur investment and job creation.
Major Victories
- Stopped an unemployment insurance tax increase that would have created a disincentive to hire new employees by tripling the already high unemployment insurance taxes on California employers without a proper analysis of what is needed to reform California’s broken unemployment insurance system (SB 222 of 2009).
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