As 2025 approaches, businesses are bracing for higher costs because California didn’t repay a federal loan from the pandemic.
During the pandemic, many people lost their jobs, and businesses closed, leading to a surge in unemployment claims. To help states handle the increased demand, the federal government lent money.
Now, businesses have to cover that debt.
The state didn’t pay back the loan on time, said Alan Gin, an economics professor at the University of San Diego. So, the federal government is raising payroll taxes by $21 per employee to get their money back.
Gin explained that California’s unemployment fund has long been underfunded. The state collects less money than it pays out, leaving the program in debt.
San Diego business owners say this added expense is tough.
It affects us directly, said Matt Gardner, owner of Mission Beach Rentals. Payroll tax is one of the first bills we see, and it’s tied to our staff costs.
Gardner said businesses are being forced to make difficult choices, like reducing staff hours or hiring fewer people.
It impacts how many people we can employ and how many hours we can offer, he said.
Both Gardner and Gin hope state leaders will step in to help businesses manage these new costs.