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Employers could face higher taxes in 2014

WASHINGTON - Employers could face higher taxes in 2014 under an Obama administration budget plan designed to help states hard-hit by the recession and weak recovery to refill unemployment insurance funds and repay money borrowed from the federal government.

The proposal would give states the choice of increasing tax payments from businesses, altering their benefits or a combination of both.

Businesses would be the most likely to be affected by the increase, but some economists say workers could also feel the change if businesses pass the costs of the tax to workers via wage freezes or smaller raises.

The administration plan would increase the income level that is subject to unemployment insurance taxes from $7,000 to $15,000. The federal tax rate used for unemployment insurance would be cut in half, meaning the federal government would not see an increase in revenue from the adjustment.

But states would be allowed to use the new income level to raise more money from employers. Congress would have to approve the recommendation.

Business organizations recoiled at news of the proposal. The National Federation of Independent Business, which represents mostly small-business operators, said that putting off a potential tax increase to 2014 would still affect decisions that employers make now.

"When you're a small-business owner and you're thinking about long-term business decisions - hiring a worker is one decision, keeping a worker on is another - and you see in a few years that your costs are going to go up, that inhibits your decision," said Chris Walters, manager for legislative affairs at the federation.

Rising unemployment has placed such a burden on states that 30 of them owe the federal government $42 billion.

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