BLOG: Surplus could shore up unemployment insurance, incentives

published on December 13, 2021 – 1:58 PM
Written by Gordon Webster, Jr.

By all appearances California is set to realize a windfall in the form of an estimated $31 billion budget surplus.

While there will be many hands out looking for a piece of that money, the Governor and Legislature would do well to devote a small portion of it in the form of relief for business owners from harmful pandemic-related public policies.

That’s a suggestion made by Loren Kaye, president of the California Foundation for Commerce and Education, in a recent Alert newsletter produced by the California Chamber of Commerce.

First, they should restore tax incentives and net operating loss tools that were suspended in 2020 when the budget picture was much more grim. The absence of these incentives make it harder for employers to reinvest in their operations.

Reintroduction of something like the research and development tax credit sends the signal California is interested in innovation-led growth.

Another step to give business owners some breathing room would be to return the state Unemployment Insurance Fund to solvency, minimizing future tax increases for employers.

California was forced to borrow $20.2 billion from the federal government to shore up this safety net. It must be paid back by employers from rising payroll taxes beginning in 2023 and well into the 2030s. Many states have recognized their roll in ordering economic shutdowns and are allocating some of their federal funds to repay Unemployment Insurance debt. California is not one of of them.

While not the bright, flashy spending that wins special interest hearts and minds, restoring tax incentives and paying off Unemployment Insurance loan debt are prudent uses of the surplus that make way for more growth.

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