Business groups push for increased unemployment taxes

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(Host) Business groups want the state to raise their taxes in order to shore up the state’s unemployment insurance trust fund.

But in exchange for paying more, the businesses also want benefits reduced for unemployed workers.

VPR’s John Dillon reports:

(Dillon) For the thousands of people out of work, unemployment insurance is a lifeline. But the problem is that the state is paying out more in benefits than it collects in unemployment taxes.

The recession – and rising unemployment – has made the situation worse. The unemployment trust fund could face a deficit by year’s end.

So businesses say they’re willing to pay more to keep it solvent. Jim Pratt is vice president of the Cabot Creamery.

(Pratt) "And we recognize that there’s a need to increase the tax that we pay. What we’re here to appeal for is that it be a balanced approach."

(Dillon) The impact of the proposed increase will vary, because the state tax rate is calculated on a company’s history of layoffs.

But in general, businesses now pay taxes on the first $8,000 of a worker’s wage. That wage base hasn’t changed in about 25 years. Companies say they support raising the base to $10,000 in 2010.

William Driscoll of Associated Industries of Vermont said that means Vermont companies would pay $20 million more next year.

(Driscoll) "We are very, very unhappy that we have to recommend that and accept that, because we recognize that these tax increases, especially as you advance over the years, will mean depressed wages, more layoffs and possible business failures."

(Dillon) But in return, businesses want the state to reduce unemployment benefits.

Labor Commissioner Patricia Moulton Powden says Vermont has a relatively generous system. Workers can collect unemployment if they’re fired for misconduct, she says.

(Powden) "We’re ninth in the country in terms of the percentage of wages we replace. We’re one of only nine states that allows for a fixed duration of unemployment. Most states tie the duration of unemployment to the amount of time you’ve worked – your attachment to the workforce. These are all great things when you can afford, but clearly we can’t afford it. The trust fund is going to be running out of money, if not by the end of this year, by early next year. And we’ve got to act now."

(Dillon) Business groups and the Douglas administration want benefits rolled back from $425 to $409 a week. But they face opposition in the legislature. Montpelier Democrat Warren Kitzmiller chairs the House Commerce Committee.

(Kitzmiller) "The business community would like to have this problem solved on the backs of unemployed workers. The system is an insurance policy that is designed to put a safety net under workers who are laid off through no fault of their own. And to say that they should be the ones who are given the burden of correcting a thing that has been made principally by a failure to increase the premiums over the years, that’s not right."

(Dillon) Kitzmiller says the Legislature will make a short term fix to the fund this year by increasing the wage base.

For VPR News, I’m John Dillon in Montpelier.

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