President-elect Obama all but promised higher taxes on the rich and letting various Bush tax cuts expire while in campaign mode, but with the recession hitting full stride, he’s backtracked on the timing of any tax hike.

Now, it’s the states you have to worry about.

States are running low on money and are looking to corporations to make up the difference. The problem starts with rising unemployment. Michigan leads the nation at 9.3%. California, our largest state, isn’t far behind at 8.2%. (All the states below in dark blue are well above the national average of 6.5%.)

Source: BLS.gov

Unemployment bites into the economy in a variety of ways but it also causes taxes to rise.

States pay out unemployment benefits, and as their pool of funds dwindles to pay out ever larger benefits to the growing ranks of the unemployed, they must increase taxes to cover the shortfall. This puts corporate America in the cross hairs, companies pay unemployment taxes.

The shortfall is made even more severe as Congress mandated a worker can collect unemployment twice as long as normal. So who’s in trouble? That’s where we turned for a state tax expert: Richard Hobbie, executive director of the National Association of State Workforce Agencies.

“Funds to pay unemployment benefits were down in 32 states as of Sept. 30 compared with a year earlier. As the accounts shrink, states will cut benefits or increase taxes on employers to keep the funds solvent.” said Hobbie. “Quite a number of states are going to have automatic tax increases on Jan 1.”

He identified eleven states, but in particular Maryland, Michigan, and California.

Maryland plans to double their tax rate on companies from 0.5% to 1% on January 1st.

For those in these eleven states, you do have a fighting chance. States will be lobbying Washington D.C. to help pay for unemployment benefits. They’ve got a legitimate case for Federal dollars to help.

1) Congress extended the time period people can collect unemployment benefits, not states. It’s only fair Congress pay for that new mandate.

2) A tax increase during a recession isn’t good policy, it’s in the national interest to avoid this.

But not everyone will agree. The 30+ states that don’t need help will be upset their tax dollars are going to states that didn’t set aside enough money during the good times. It’s a scenario right out of the ant and the grasshopper fable.

In our weekly “Ask the Economist” feature, our resident Economist, Mike Donnelly, tackles your questions about the economy. If you’ve got a question — and no topic is too big or small — you’d like him to field, e-mail us at economist@pbp.com or leave your queries in the comments section.

Tags: Bush tax cuts, Congress, President-elect Obama, Taxes, Unemployment