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.