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States Enlist Employers To Pay Back Federal Loans

States are charging employers higher taxes to pay back federal loans for unemployment benefits.

The bill for states to pay back federal assistance for unemployment benefits is due, and states are turning to employers to foot the tab, the Associated Press reports. In total, just over half the states owe the federal government about $38 billion, and the first interest payments on those loans were due on Friday, totaling just over $1 billion.

According to the AP, most states charged employers a one-time assessment to cover the payment. In addition, employers in those states will pay on average about $21 in federal taxes next year to pay back the loans; at the same time, state taxes are increasing because more people have applied for unemployment insurance during the recession.

One New Jersey employer told the AP he would probably pay about $24,000 in additional taxes this year. "The problem is I can't grow my sales fast enough or raise my prices fast enough to make up for that additional expense," he said.

As part of the 2009 stimulus package, the federal government delayed interest payments on federal loans for two years, but those bills are now coming due. According to the AP, the federal government is charging states a 4 percent interest rate on the loans.

Dylan Scott is a GOVERNING staff writer.
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