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OP-ED: Small businesses cannot afford a $7-billion tax hit on top of the pandemic

Bill Hammond
CEO of Texas Employers for Insurance Reform and former CEO of the Texas Association of Business

Now that the legislature has been called back into special session by Governor Abbott, there is a choice they must make. Impose $7 billion in new taxes on businesses to close the Unemployment Insurance deficit, or use federal aid money to close that deficit, offering much-needed financial relief to small businesses across Texas.

The COVID-19 pandemic has been a disaster on many levels. Over 600-thousand Americans have lost their lives, families have been shattered, and unemployment skyrocketed. Business took a significant hit, and many did not survive the economic stress of shutdowns. The odds were simply insurmountable.

Today, this pandemic has created another difficult challenge to businesses and the entire State of Texas. Because of the unprecedented explosion of unemployment, the Texas Unemployment Insurance (UI) system faces a deficit of almost 7-billion-dollars.

Businesses fund the entire UI system through a tax. On the surface, it would appear there is only one way to close that 7-billion-dollar deficit, raise that tax. That, however, creates a whole new set of financial problems for businesses that are already facing severe economic challenges from the pandemic that has caused the deficit in the first place. Raising those taxes would cause more economic damage and hurt Texas workers in the form of reduced wages and lower employment growth. It also would hurt Texas consumers in the form of higher prices.

There is, however, another solution that would keep businesses on track to recovery. Texas will receive nearing 18-billion-dollars in federal aid to help with pandemic recovery. Lt. Governor Dan Patrick has proposed using 7-billion-dollars of that federal aid to close the UI deficit. Doing this would mean taxes on struggling businesses would not have to spike, helping those employers and their employees, consumers, and maintain job growth.

As the first chairman and employer commission at the Texas Workforce Commission and an employer myself, I understand first-hand the burdens that this system places on employers and employees alike. In regular times, while difficult, this system does serve the people of Texas well, but these are not regular times. The system has been stretched like it never has before, and that means we must take measures to ensure that the system stays financially healthy. At the same time, we cannot financially crush the businesses that support it. The last thing this state needs to do is address a problem caused by high unemployment with a tax increase that could lead to more unemployment.

This is not a “hand-out” to business. Using a portion of this federal aid to pay off our UI deficit will benefit all Texans. This will keep our unemployment system stable and mean that we can continue to support hard-working Texans who have lost their jobs through no fault of their own. This also will keep Texas businesses from facing yet another financial blow when they have seen too many of them. It will keep job creation growing and take away another reason for consumer price increases.

This federal money is to help states recover from the horrible economic disaster that this pandemic has caused. I can think of no better way to do that than keeping the Texas Unemployment Insurance system solvent.

Bill Hammond is the CEO of Texas Employers for Insurance Reform and former President and CEO of the Texas Association of Business