RICHMOND, VA (WWBT) - Virginia is relying more on borrowed money to pay unemployment benefits. Now, to pay back the federal government, the state is raising taxes on employers.
Richmond's retail sector is on the rebound.
"Each weekend, retailers are having better weekends, the weather is cooperating," said George Peyton with the Retail Merchant's Association.
But the ongoing unemployment crisis could slow this recovery. Businesses are being hit with higher unemployment insurance taxes. State law mandates the increase in order to replenish the unemployment trust fund. For retailers, it's an added cost of business that could slow hiring.
"The push back could be- well, let me hold off a little bit longer to get more productivity out of the existing employees, and seeing how far I can go," said Peyton.
The problem is expected to get worse in the next few years. Right now, the trust fund is $317 million in the hole. By the end of this year, that number is projected to be more than $545 million.
The resulting tax burden on employers will translate into a near doubling of the unemployment tax per employee this year over 2009. The Virginia Employment Commission projects that figure will continue to rise until 2012 before it starts to go down.
"Even small retailers, the small mom and pops who may only hire 1 or 2 people, they still are impacted by it because it's an additional tax, it's taking something off the bottom line," said Peyton.
It's one more obstacle that small businesses face as they try to turn things around. Peyton says those businesses are adapting, and finding ways to grow.
"I think you're going to find that people will learn and have learned ways to offset these increased costs," he said.
The need for those costs will only end when more people start getting back to work.