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Imagine someone breaking your window, handing you the bill, and calling it even.
That’s exactly what’s happening to small businesses in California.
While every other state that borrowed federal money to cover unemployment costs during the pandemic has paid off its debt, California is still on the hook for more than $21 billion. And instead of fixing the problem, progressives in control of the Legislature are forcing small business owners, the very people they shut down during the pandemic, to cover the interest.
It’s not just unfair. It’s outrageous.
Let’s remember how we got here. Over five years ago, when COVID struck, the state ordered small businesses to close, in many cases with little warning and sometimes by force. These weren’t giant corporations with deep pockets. They were family-run restaurants, hair salons, hardware stores, and local gyms — the backbone of our communities. One out of every three never reopened.
As unemployment skyrocketed, California borrowed billions of dollars from the federal government to keep jobless benefits flowing. But thanks to a broken system, lack of oversight, and sheer incompetence, the state lost control of the process, paying out over $30 billion in fraudulent claims. The money was stolen by scam artists, criminal syndicates, and even inmates running fraud rings from behind bars.
Taxpayer money was drained from the system at record speed, and to this day, almost no one has been held accountable. Few arrests. No serious effort to recover the money. No justice.
And now, instead of going after the criminals or creating a responsible plan to pay off the debt, progressive lawmakers in Sacramento are sending the bill to small business owners through higher taxes.
And here’s the kicker: those higher taxes already started years ago. And they keep going up every single year until the debt is paid off.
Small businesses are now paying an extra $42 per employee per year, with that amount increasing annually. That means $84 the second year, $126 the third, and so on. For a mom-and-pop shop with 10 employees, that’s $420 this year, $840 the next — a growing burden with no end in sight.
And what are they getting for it? Nothing. Not better service. Not better programs. Just a penalty for surviving.
And it’s not just the taxes. The interest on the state’s unemployment insurance debt continues to rise with every passing month. The longer California delays paying off the principal, the more expensive this crisis becomes, digging an even deeper hole for the next generation to climb out of that growing debt.
Meanwhile, Governor Gavin Newsom is proposing a token $634 million payment toward the debt, not even 3% of what’s owed. It doesn’t make a dent.
This isn’t leadership. It’s neglect.
These rising taxes hit the heart of our economy: the local grocer, the family-owned auto shop, the daycare down the street. They employ your neighbors, support your schools and youth teams, and give back to the community. And now, they’re being punished for the government’s failures.
Enough is enough.
Before Sacramento even thinks about expanding unemployment benefits, raising the taxable wage base, or giving benefits to people who haven’t paid into the system, it must clean up this mess. That starts with a real plan to pay off the debt, a full accounting of the fraud, and aggressive recovery of stolen funds. Californians deserve answers. And small businesses deserve relief.
NFIB, California’s leading small business association, is right: this isn’t just another tax — it’s a crushing penalty. It’s a punishment that small businesses did nothing to deserve.
The Senate Republican Caucus is leading the charge to pay down the debt, stop the endless tax hikes, and protect the small businesses that keep California running. They’re demanding accountability, real solutions, and a future where Main Street doesn’t get stuck paying for Sacramento’s mistakes.
California likes to think of itself as a national leader. It’s time to act like one and finally put this debt in the rearview mirror.
John Kabateck is California State Director for the National Federation of Independent Business (NFIB).
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