Just the Facts, Please, On UI Tax Job Killer (Find Out How Much It Will Cost Your Business!)

There is an old "Dragnet" and Sgt. Joe Friday reference in here somewhere (just the facts, ma’am), but I am sidetracked already. This is about a more than $700 million business tax increase with the unemployment insurance trust fund legislation passed by the General Assembly and signed by the governor.

It’s bad for employers and employees — those who will lose their jobs or not see a pay increase due to this additional and unreasonable tax burden. Yes, employers need to pay more to shore up a bankrupt system. But eligibilty, benefits and other issues must also be addressed.

Here is how you can learn more and have your say:

  • Calculate your business tax increase over the next two years (all you need is your current unemployment tax rate — the range is from 1.1% to 5.6% — and total number of employees)
  • From there, send a letter, or otherwise, communicate with legislators. Let them know a more balanced solution is needed
  • Read the facts, countering the myths that have been communicated by Senate Republican leaders on this issue. Why would legislators institute the largest business tax increase in state history and go out of their way to brag about it?

Companies are struggling and people are losing their jobs. Ironically, and sadly, a "solution" for the unemployment funding woes will only lead to more job losses.

UI Bill a Real ‘Stinker’

There has already been a lot of rhetoric — with more to come — over the $700 million business tax increase disguised as a solution to the state’s unemployment insurance trust fund bankruptcy.

If Senate Republicans were as resolute in negotiating a balanced piece of legislation that would truly fix the problem as they were in crafting a fantasyland press statement that contains more inaccuracies than insights, we wouldn’t have this problem today.

Don’t believe us? Try this Fort Wayne News-Sentinel editorial, using the words "stinker" and "abomination" in describing the legislation. It also won’t be the final evaluation of this mess, which ironically and sadly will lead to even more job losses.

Read the News-Sentinel take here.

But the geniuses in the legislature decided to put the whole problem on the shoulders of employers.

Businesses currently pay between 1.1 percent and 5.6 percent on the first $7,000 of each employee’s annual pay, with higher percentages charged to companies with a greater history of layoffs. Under the new law, businesses next year will pay between 0.70 percent and 9.5 percent of the first $9,500 of a worker’s pay. Starting in 2011, tax rates will rise to 0.75 percent to 10.2 percent of $9,500.

The fund took in $579 million last year and paid out $986 million and is expected to pay out $900 million more than it collects this year. The state has already borrowed nearly $800 million from the federal government to keep the system going.

The legislation is expected to raise about $315 million a year, and it includes administrative changes lawmakers hope will save the state about $300 million more. Not exactly a total solution, is it? And what will the cost of the fix be?

“Absolutely there will be job losses” because of the extra burden on businesses, says Patrick Kiley, president of the Indiana Manufacturers Association. The Indiana Chamber of Commerce agrees.

Unemployment is usually a “lagging indicator” of a recession, meaning it will continue to rise after the economy stabilizes. This bill is likely to add even more. That means even more paid out and still not enough coming in.

We take it back. Gov. Daniels should have vetoed this abomination.

Statehouse Leaves One Searching for the Right Words

I’ve been doing this writing thing for publication for more than 30 years now (must have started from the crib, right?) and rarely experience trouble expressing myself. The problem here is not the dreaded writer’s block, but what not to say following a long, long day at the Indiana Statehouse on Wednesday.

(Indiana Chamber members can get the full story directly from ICC president Kevin Brinegar on Friday from 9:30-10:30 a.m. ET in our monthly Policy Issue Conference Call. Kevin has just about seen it all in his nearly 30 years around the Statehouse, but Wednesday’s developments had him joining others in shaking his head. Remember, this is for members only. Registration is required).

I’ll try to be brief. First key point: At a time when economic fortunes are low and unemployment is high, legislators pass an unemployment insurance trust fund bill that practically guarantees additional job losses. Figure that one out. Second, a state budget proposal (the lone requirement for the nearly four-month session) fails in the House (71-27) and that is the good news. The "compromise" would have started the steady climb up the "cliff" that everyone said needed to be avoided (in other words, relied too heavily on stimulus funds and set the stage for big tax hikes two years from now or sooner) and took several steps in reverse on education policy.

I’ve come to learn in 11 years at the Chamber that negotiations in the final days of the session produce the ultimate final bills on the major issues. I’m not a big fan of that, but I’ve come to accept it as reality. The products of these conference committees, however, seemed to evolve from one-sided negotiations. House Republicans and Senate Democrats, the minorities, talked of being shut out. Senate Republicans unfortunately seemed to be missing in action based on the conference committee outcomes.

Just a few details. The unemployment "solution" was termed a $685 million tax increase on employers over two years. Econ 101, or maybe freshman common sense, tells you struggling employers faced with monumental tax increases will have to cut costs in other ways — quite likely in personnel. Passionate speeches aside from both caucuses, the bill passed the House 52-47 (party line vote) after 96-3 passage in the Senate.

The budget proposal: Too much spending ($28.1 billion over two years when the state doesn’t have that much money to spend). A message that we’re still not serious about education. No scholarship tax credit. A cap on charter schools at a time when everyone from President Obama on down is calling for more school choice. House Minority Leader Brian Bosma said this move would have jeopardized $275 million in education stimulus funding and disqualified the state from Obama’s $5 billion Race to the Top education grant fund.

I’ll stop there. There will be plenty more to come as those two dreaded words — special session — are now reality.

Brinegar: It’s Not Too Late for Legislators to Act

Two weeks remain in the 2009 Indiana General Assembly legislative session. Will we be smiling, crying or shrieking in horror when the final gavel falls — likely late in the night on April 29?

Chamber President Kevin Brinegar offers his two-minute video take on some of the things that should happen before the legislators leave Indianapolis. Hint: it’s not too late for local government reform and a fair solution must be found for the broken Unemployment Insurance Trust Fund system.

See what Kevin has to say in this Inside INdiana Business commentary and let us know what you think.

Chamber Provides Weekly Update for ‘Abdul’

The Chamber’s Cameron Carter focuses his efforts on federal advocacy, as well as economic development and small business issues at the state level. He offered the following on the Chamber’s weekly radio appearance (9-9:30 on Wednesdays) on WXNT’s (1430 in Indianapolis) Abdul in the Morning program.

  • Federal stimulus: "It remains to be seen what it will do for business." Carter explains that the majority of the estimated $4.3 billion coming our way is tied to Medicaid, education and other dedicated purposes with approximately $200 million to be used at the discretion of state officials. He reiterates that deeper tax cuts and infrastructure investments would, in the Chamber’s view, have been more effective in providing immediate relief.
  • Local government reform: Carter compares today’s townships to the human appendix — "you don’t need it in this day and age." Asked about "selling" an issue that is not glamorous in nature, Carter offers that if "families don’t have money to spend, they don’t spend it." In addition providing more effective services, the Kernan-Shepard reforms are "about putting our finances in better order and making people more accountable."
  • Unemploment insurance trust fund: There are no easy answers to this growing problem, one the Chamber had identified more than a year ago. Eligibiliy loopholes must be addressed, along with benefit levels that are above the national average, with ultimately increased investment by employers (and potentially employees) helping make the system sustainable moving forward.