Jobless-benefit system produces a Catch-22

Icall them "stealth taxes."

These are direct taxes that are indirectly applied so that most people attribute them to something else.

For example, one of the first taxes initiated by Congress this year was the federal tobacco tax increase.

Taxes on cigarettes were increased to $1.01 per pack, up from 39 cents.

When the price of cigarettes went up, most smokers blamed it on the tobacco companies, but they were simply passing on the costs to the consumer.

For those who smoke an average of a pack a day, they just had their taxes increased to $368.65 a year.

And they probably don't realize it. Smart political move by Congress.

Likewise, struggling small businesses across America are about to be hit next year by another stealth tax through state and federal unemployment benefit increases.

Many people in the U.S. probably assume that unemployment compensation is deducted from their paycheck along with withholding and FICA.

And many think that when they receive unemployment compensation it is from a fund into which they have paid. After all, the check they receive is from the government, not from their previous employer.

But that's not how it works.

Thanks to another smart political move by Congress (made decades ago), the government gets the credit for helping those in need when actually the businesses directly foot that bill.

When Congress announces it is extending unemployment benefits to help those in need, who gets the credit? Congress.

Who gets the bill for it? The businesses that pay it.

Stealth taxes.

Virginia borrowed $252 million last month from the federal government to shore up the unemployment benefit fund.

As in anything borrowed, it must be repaid -- not by employees, but by the businesses that employ them.

These taxes (the government calls them "contributions") average $95 per employee.

They are expected to rise to $234 in 2011 and $263 in 2012, or until the state fund is solvent, according to the Virginia Employment Commission.

And that's just the state increase.

The bottom line?

Many small businesses that are struggling could use additional help -- employees -- but they can't afford it, and higher taxes only make the situation worse.

Many people would love to go to work, but they can't find jobs because small businesses can't afford to hire them.

So they continue to receive unemployment compensation paid for by -- get this -- the businesses that can't afford to hire them.

What's wrong with this picture?

Stu Neal is chief executive officer and principal of the SMN Consulting Group in Mechanicsville. He can be contacted at . Visit his Web site at http://www.StuNeal.com.