Businesses in California are still shouldering the $31 billion mistake of Acting Labor Secretary Julie Su three years on. The so-called "Su tax" was a hike in payroll taxes imposed to offset the massive benefits fraud that happened during the Wuhan coronavirus (COVID-19) pandemic in 2020.
Nearly 60 businesses and agriculture groups in the Golden State, led by the California Chamber of Commerce, brought this concern to light in a March 23 letter. They complained that their more than four million members face escalating payroll taxes to bail out the state's Unemployment Insurance (UI) Fund. The letter addressed to leaders of California's state legislative branch warned that the taxes – which could exceed $400 per worker annually – threaten employee-heavy small businesses and restaurants already reeling from the state's draconian COVID-19 lockdowns.
The business and agriculture groups noted how the UI Fund spent up to $31 billion on payouts for fraudulent claims, something that happened under Su's purview as the secretary of the California Labor and Workforce Development Agency (CLWDA).
Su herself admitted in January 2021 that the CLWDA, through the Employment Development Department under it, wasted as much as $31 billion in pandemic unemployment insurance payments. The amount wasted was the most of any state.
"There is no sugar coating the reality," Su remarked at the time. "California did not have sufficient security measures in place to prevent this level of fraud." (Related: California lost $11 billion to fraudulent unemployment claims, state officials say.)
Su headed the CLWDA under California Gov. Gavin Newsom from January 2019 until July 2021. President Joe Biden then called her to Washington, D.C. to serve as the deputy labor secretary. She then assumed the post of acting labor secretary after the departure of Marty Walsh in March.
"California's businesses … had no control over mistaken distribution of the employer-funded UI funds," the letter stated without mentioning Su by name. "But now, California employers are being taxed for these policies."
"Su tax" appears to compromise her nomination
The Senate Health, Education, Labor and Pensions (HELP) Committee voted along party lines on April 27 to advance Su's nomination as labor secretary by the full chamber. Her confirmation remains very much in doubt due to her role in the collapse of the California UI Fund, according to the Washington Free Beacon.
During a HELP committee hearing the week prior, Su insisted that she had moved swiftly to stop the Golden State from being defrauded during the COVID-19 pandemic. However, audits at the federal and state level easily disproved her claims.
The state audits found that Su had suspended a requirement asking those receiving unemployment aid to check in every two weeks to prove they still qualify for benefits. Moreover, the UI Fund also paid claims to parties that its own analysis deemed suspicious. Meanwhile, a federal audit discovered that the state transferred $1.6 million in unemployment benefits to one fraudster over a 164-day period.
Some Republicans have dubbed the extra tax as "Su tax," but Rep. Kevin Kiley (R-CA) begged to differ. He told the Free Beacon he prefers to call it an "incompetence tax."
"Private citizens are being forced to pay for their government's failures," Kiley said. "The predicament that small businesses in California now find themselves in – facing double taxation to make up for the government’s negligence – is another example of why Su's nomination to be our nation's next labor secretary is so ill-considered."
Sen. Bill Cassidy (R-LA), ranking member of the Senate HELP Committee, voiced some of the objections to Su's nomination that were raised by other lawmakers and national business group during the April 27 hearing. According to the Louisiana senator, Su "has an extensive record of partisan activism and promoting policies that undermine workers to the benefit of politically-connected labor unions."
"A qualified secretary of labor needs to successfully handle negotiations, manage a department properly and refrain from partisan activism," Cassidy remarked. "I haven't seen evidence of Su's ability to do any of those three things."
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Watch this video about the expiration of unemployment benefits for millions of Americans.
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More related stories:
Bank of America flags "outrageous" unemployment fraud worth $2 billion.
Government watchdog: Over $60B lost to pandemic unemployment benefits fraud.
Government lost as much as $100 billion to stimulus money fraud during COVID-19 pandemic.
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