NCPA - National Center for Policy Analysis


March 14, 2008

When budgets begin to tighten, many state politicians start to talk tax hikes. So, credit Texas Governor Rick Perry (R) for cutting taxes this week as a way to keep his state as a national leader in job creation, says the Wall Street Journal.  Perry suspended the state unemployment insurance "replenishment" tax for the rest of the year on grounds that government doesn't need the money but employers do.


  • By law, Texas must keep at least 1 percent of all taxable wages in the state in its unemployment trust fund, or some $920 million today.
  • The trust fund now stands at $1.6 billion, is growing by the day and isn't in any immediate danger of being drained.
  • Texas has a near record low unemployment rate of 4.3 percent, enjoys a job creation rate that is twice the national average, and in January added 28,000 net new jobs -- more than any state in the union.
  • With numbers like that, there is little reason for employers to "replenish" a trust fund that is already flowing over.

All told, Perry is saving Texas businesses $260 million in unnecessary unemployment taxes.  In recent months he has also directed the state to rebate $170 million that employers paid into the trust fund in 2007.

The decision isn't universally popular; the state's AFL-CIO complained this week that the money should have been used to give benefits to part-time workers.  However, the best way to help workers is to make it easier for businesses to sustain a buoyant job market, says the Journal.

Source:  Editorial, "Lone Star Statement," Wall Street Journal, March 14, 2008.

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