Legislature Approves Insurance Tax Cut Bill

An immediate $31 million cut in the tax Idaho businessmen pay for unemployment insurance won final legislative approval on Thursday and was forwarded to Gov. Phil Batt.

The bill, part of the retiring Republican chief executive’s final legislative program, cleared the Senate unanimously to become the first piece of legislation to reach the governor’s desk this session.

Batt directed a special task force that included labor and business to come up with a new taxing schedule that would maintain the integrity of the trust fund that compensates laid-off workers, while still reducing the burden on the 36,000 businesses that employ 400,000 people.

“It was the governor’s desire and the committee’s desire that this money be passed back to the employees either through new jobs or the development of new business that bring more jobs,” Commerce Chairman Dean Cameron, R-Rupert, said. “It’s meant to be an economic development tool.”

The lower tax rates will benefit all but the handful of businesses with the worst layoff records and will total more than $113 million in cash those employers will keep to themselves over the next four years.

Lawmakers expedited action on the proposition - it cleared the House on Monday without dissent - because the Labor Department has been delaying since late December sending the jobless tax notices to employers.

It is the fifth reduction in the tax since the state’s near-depression over 15 years ago forced the tax rate to be pushed to the highest in the nation at 2.4 percent of payroll. That 1983 plan to stave off the fund going bankrupt also slashed benefits.

Workers have recovered some of those lost benefits as the employers received the tax cuts. But even with the latest reduction, the Idaho tax rate is still a tenth of a percentage point higher than the national average.

And with state benefits still running markedly higher than the national average, organized labor’s role in last year’s negotiations was to protect the benefits workers already have against any erosion.

The AFL-CIO and other labor interests headed off attempts to slash weekly benefits even more than they are now for money a laid-off worker might earn from odd jobs. And they prevented efforts to make it significantly harder for a worker to requalify for unemployment coverage after being out of work.

The package does include a 16 percent increase in the minimum weekly benefit. But it also increases the amount of money a worker has to earn to be eligible. That could mean several hundred low-wage workers who now qualify for compensation would become ineligible, something labor will monitor.

Even with the four previous tax cuts - 1985, 1987, 1989 and $24 million in 1997 - the balance in the trust fund continued to increase, hitting more than $330 million by the end of 1997.

Analysts said the new rate schedule will keep the fund healthy while allowing the entire compensation program to respond more closely to economic developments.