TOLEDO, OH (WTOL) – Ohio business owners are paying more in taxes this year thanks to the state's inability to repay federal loans.
The Ohio Department of Job and Family Services began borrowing money from the United States Department of Labor in 2009 as the recession drove unemployment rates, and benefit costs, to levels unseen since the 1980's.
All in all, Ohio now owes the federal government $2 billion. That total is less the $600 million the state paid in on its balance in 2011. Now business owners are being forced to pay higher taxes in an effort to reduce the state's debt.
Kevin Lent, owner of several Toledo-area Sonic restaurants, says the increased tax rate will hurt his business and his customers. "You work awful, awful hard and to see the returns on the fruits of labor get diminished," said Lent. "It gets very frustrating. It hits us to the tune of several thousands of dollars this year."
Of course, Lent is not alone in his frustration. Mark Miller, president of Payroll Select, which processes payroll and handles the tax requirements for some area businesses, says some of his clients are being forced to pay more than $20,000 in extra taxes this year.
Worse yet, Miller says his clients were not informed of the rate increase until November of last year. "You're not notified of that until nearly 11 months into the game," said Miller. "It's difficult for a lot of our clients."
Adding to the uncertainty, Miller says no one is sure how long the state will be collecting at the higher rate. "For a lot of our clients that are looking to budget, it becomes increasingly difficult because the duration of how long it will go on is unknown until next November," said Miller.
Ohio officials say the problem could not have been avoided, as the recession left so many people unemployed the state had no choice but to take the federal loans.
"There's not an option to stop paying unemployment compensation," said Ben Johnson of the Ohio Department of Job and Family Services. "This isn't something that the Ohio Department of Job and Family Services had control over. It's not something anyone in Columbus could have avoided."
Still, the tax hike leaves business owners like Lent in a difficult position.
"We can't pass this on to the consumer. The consumer is still, we think, reeling from the recession," said Lent.
Click Here to read more about the unemployment compensation partnership between states and the federal government.