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Indiana House OKs tax-increase repeal, jobs bill

February 24, 2010

The Indiana House approved legislation Wednesday that would repeal an unemployment-insurance tax increase and approved a package of tax credits and other incentives designed to create jobs.

The Democrat-controlled chamber voted 82-17 in favor of a bill that would repeal an increase on taxes that employers pay into the unemployment insurance fund. It voted unanimously for the job-creation bill.

Both bills included major changes to legislation previously passed by the Republican-led Senate. Sponsors of those bills said both measures would go to a House-Senate conference committee where compromises will be sought.

It's possible that lawmakers will adjourn the session next week, which would give lawmakers little time to strike deals on several bills that could pass both chambers and be sent to Gov. Mitch Daniels.

Under a bill approved last year by House Democrats and Senate Republicans, increases on jobless insurance taxes were slated to start going up later this year as a way to start shoring up the state's unemployment insurance fund. The law did not decrease benefits for the jobless.

The fund has borrowed more than $1.6 billion from the federal government to remain solvent.

Senate Republicans passed a bill earlier this session that would delay the tax increase for one year, saying it would raise employer taxes by at least $300 million this year and lead to layoffs in a still struggling economy. House Republicans also supported that.

The House voted overwhelmingly on Tuesday to repeal the tax increase altogether. But it still contains provisions that Republicans oppose.

One would expand eligibility for jobless benefits to more people, which would allow the state to receive $148 million in stimulus dollars for the fund. It would also increase the maximum weekly amount in benefits.

The Daniels administration has said that once the stimulus dollars run out in about two years, it would cost the fund an extra $80 million to pay for the expanded eligibility each year and more than $40 million to pay for the higher weekly benefits. And federal unemployment insurance taxes are set to begin increasing next year until the federal loans are paid off.

Senate Tax Chairman Brandt Hershman, R-Lafayette, said the amended bill passed by the House on Wednesday contained several provisions detrimental to employers, and an outright repeal of the tax increase — instead of just a one-year suspension — could lead to higher taxes in the future.

"And increasing the maximum weekly benefit would put an already bankrupt fund further into back bankruptcy," he said.

Rep. David Niezgodski, D-South Bend, said House Democrats went along with a repeal because they understood that businesses were struggling.

"But it's been several years since we have had an increase in benefits," he said.

Meanwhile, some Republicans complained that House Democrats had waited so long in the session to introduce a package designed to create jobs. But the provisions that passed as amendments on Tuesday won wide bipartisan support, and the overall bill passed 99-0 on Wednesday.

The bill includes tax credits for small businesses with fewer than 150 employees that hire new workers; tax breaks for new Indiana businesses for the first two years of their operation; requiring companies with state contracts to hire 80 percent of their work force from Indiana; and spending $20 million to draw down $100 million in federal stimulus funds so companies can hire poor people out of work.

Rep. Dale Grubb, D-Covington, said the package could create between 10,000 to 30,000 jobs.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said he had not reviewed the package and the bill would definitely go to a conference committee.

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