Time to stand on my tax soap box once again! :-)Forget about what you are hearing about small business tax cuts in political talking points this year, our taxes have actually gone up substantially and it's only the middle of February.
So far we've received two (of many to come) new tax assessment rates for 2010, both big increases:
1) The first is on our building in the form of county real estate taxes. Frederick county has devised a devious plan to deal with falling commercial property values in our area - while the assessed value of our building fell by $22,000 this tax year, the county TRIPLED the assessed value of the parcel of land the building is built on (from $42,000 to $146,000 - which is ridiculous and probably based on commercial land sales from back in 2005/2006 when people were being crazy). This increased our property tax bill about $1,200 for the year. The total assessment is now way out of sink with actual property values, and I would estimate that the county is now valuing our warehouse at maybe $150,000 more than the actual market value. We're going to appeal the new assessment, but we've never gotten far with that in the past.
2) The second increase is a BIG one. CNN recently ran an article about how businesses are getting walloped by unemployment tax increases.
"Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.
The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.
Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.
The states are scrambling to restore their unemployment insurance trust funds, which cover claims.
State trust funds have been decimated by the Great Recession, forcing a record 26 states to borrow a total of more than $30 billion from the federal government. The numbers are expected to grow to 40 states borrowing $90 billion by 2012, said George Wentworth, policy analyst at the National Employment Law Project.
"States are going to be facing higher unemployment tax rates for some period of time," Wentworth said."
Well, we got hit by that one this year too. In late December we got a letter for the state of Virgina letting us know that our unemployment tax rate, which we pay as part of OUR payroll tax contribution for every employee, was going up about 2.5x.
The letter stated that the states unemployment fun is running dry, and a substantial increase was needed to maintain the health of the fund. Most people probably think the Federal Government pays for most of those benefits, but the majority actually come out of state unemployment pools funded by businesses through a payroll tax, and when the Feds do mandate unemployment benefit extensions they are actually authorizing Federal loans to the state pools that have to be paid back in the future.
So this increase translated into a $6,800 annual increase in our state unemployment tax contribution this year. Even more problematic is that the state front loads this tax assessment every year, meaning instead of paying equal installments of the tax throughout the year, they front load the entire amount across the first 4 months of annual payrolls, so we have to fully fund this tax in our payrolls between January and April. We run two payrolls a month, so for the first 8 payrolls this year we have to pay an extra $850 each time in additional unemployment taxes. Imagine if the Fed estimated your total annual withholding tax, and then took it all out of your paycheck over just 4 months. Ouch.
Anyway, I totally understand that things are tough and a lot of folks are out of work and need these extended benefits, but just remember who's really paying those bills...
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