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Bill would raise unemployment taxes, cut benefits

Rebecca Boone Associated Press

BOISE – A bill that would increase unemployment taxes paid by businesses while reducing benefits to those who are unemployed was introduced in the House Commerce and Human Resources Committee on Thursday, with strong support from both business and labor groups.

Under the bill, business taxes would increase by about 12.5 percent starting in July, raising about $10.5 million. Meanwhile, unemployment benefits would drop by roughly 5 percent.

The measure is necessary to save the state’s unemployment trust fund from insolvency, Idaho Commerce and Labor Department spokesman Dwight Johnson said.

A two-year freeze on unemployment insurance taxes ended in January. Under current law, taxes are slated to climb an average of 113 percent this year, raising more than $100 million for the fund, Johnson said. The bill would reduce that increase by lowering the amount of money considered “adequate” for the unemployment insurance trust fund by nearly half.

Under the bill, the state would agree that a balance of $200 million would maintain the trust’s solvency, instead of the current $390 million required.

The trust now hovers around $190 million and the additional money would be raised by upping taxes and cutting benefits. Over the next six years, officials estimate businesses will pay $72 million more in taxes and unemployed workers will receive about $72 million less in benefits.

After two years of negotiation, both the business and labor communities have signed onto the proposal. It was difficult to convince them to raise taxes and lower benefits during tough times, Roger Madsen, director of Idaho Commerce and Labor said.

“The business community was prepared to absorb some tax increase,” said Teresa Moliter with the Idaho Association of Commerce and Industry. “We think this package is the definition of fairness.”

Dave Whaley, the president of the AFL-CIO, said maintaining solvency of the unemployment insurance fund was critical to Idaho workers.

“It was important for the group to come up with something that would spread the burden,” he said.

The state’s unemployment trust fund has been paying out more than it has been taking in for four years, dropping from a balance of $330 million to $190 million.

If the trust fund goes broke – as has happened in some other states – Idaho would be forced to borrow money from the federal government to continue paying unemployment benefits and find a way to pay back the federal loan with interest.

Lowering the trust fund’s adequacy level allows businesses to pay lower taxes, which could help bolster the state’s economic recovery, Johnson said. Lowering the adequacy level is safe, because the economy is less reliant on seasonal work than it has been in the past.

“We want to keep as low a trust fund as is possible and still be prudent,” Johnson said. “We’re proposing about $200 million – we think that is an acceptable risk.”

If approved, businesses would pay an average tax per employee of $364 – about $36 more than the current tax of $328. Now that the freeze has expired, if the law remains unchanged, businesses will pay an average employee tax of $725 – more than double what they pay now.

The new law would also decrease the amount of unemployment benefits paid out to workers by about 5 percent. A person receiving the maximum benefit of $325 a week would only receive $312 a week. Workers who quit, were fired for cause or refused to work would have to work longer before re-qualifying for benefits.

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