Indiana jobless fund tax increase hot topic at Statehouse

Whether to delay increases in taxes that employers pay to Indiana’s unemployment insurance fund is becoming a contentious issue in the General Assembly.

Lobbyists for employers told the Democrat-controlled House’s Labor and Employment Committee on Thursday that the tax increase would lead to more layoffs in a still struggling economy. They favor a bill the Republican-controlled Senate passed that would delay the tax increase this year.

But others are against waiting and told the House committee that the increase is needed now to help shore up the state’s bankrupt jobless benefits fund. The committee did not vote on the Senate bill Thursday, but is expected to address it again soon.

House Democrats say they’re skeptical of a delay because of mounting debt in the jobless fund.

"We have got to do something to stimulate jobs and we’re not convinced this (delay) is the way to go," said Rep. David Niezgodski, D-South Bend, chairman of the House Labor and Employment Committee.

House Speaker Patrick Bauer, also a Democrat from South Bend, has suggested that House Democrats might use the bill as a vehicle for a job-creation plan his caucus has yet to reveal. But House Minority Leader Brian Bosma, R-Indianapolis, said he was concerned Democrats would load up the legislation with pro-labor provisions that could kill the bill.

The unemployment insurance fund has been paying out hundreds of millions of dollars more in benefits than it has been receiving in taxes, and has borrowed $1.6 billion from the federal government to keep the fund solvent.

Lawmakers enacted a law last year that raises unemployment taxes on most employers while keeping jobless benefits at a maximum of $390 a week.

Companies now pay between 1.1 percent and 5.6 percent on the first $7,000 of each employee’s annual salary, with higher percentages charged on companies with a greater history of layoffs.

This year, businesses are slated to pay between 0.70 percent and 9.5 percent of the first $9,500 of a worker’s salary. In 2011, tax rates are scheduled to increase to 0.75 percent to 10.2 percent of the $9,500 taxable wage base. The higher taxes are expected to raise about $350 million for the fund this year.

Republican Gov. Mitch Daniels signed the increase into law last year, but now favors a one-year delay.

Josh Richardson, director of governmental affairs for the Department of Workforce Development, said the agency recognizes that the unemployment fund needs to be fixed.

But, he said, "With so many Hoosiers out of work right now, it would be a terrible problem to increase the cost of hiring workers back. And so a one-year delay would—we think—help jobs in this state and encourage employers to bring folks back to work."

Without a delay, workforce development officials say 7,100 employers at the highest tax rate will have their taxes more than double from $392 to $902 per employer. About 15,000 companies already delinquent in paying their taxes would see their rates triple.

Steve Austin, a lobbyist for Elwood-based Red Gold, said the tomato products company wanted to add 40 workers. But now it plans to hire only 20 because of the tax increase.

"It’s a huge bite," Austin said.

But Pete Rimsans, executive director of the Indiana State Building and Construction Trades Council, said lawmakers should not turn back after agreeing last year to start fixing the insurance fund.

"It’s time to swallow our pill, roll up our sleeves and get the job done," he said.