Two of Indiana’s most influential business advocates are lobbying Congress for relief from the state’s fast-growing
Unemployment Insurance Trust Fund debt.
Over the last decade, Indiana has annually paid more in benefits to the unemployed than it has collected in payroll taxes, gobbling up a $1.6 billion trust fund surplus—and then some. During the last two years, the state has borrowed heavily from the federal government to pay for unemployment insurance.
Indiana’s UI Trust debt is projected to reach $3 billion by year’s end. Last month, the General Assembly agreed to a one-year delay to a $400 million state payroll tax hike intended to shore up the fund.
The delay spurs automatic penalty collection efforts from Uncle Sam. Every Indiana business now faces a mandatory $21-per-employee federal payroll tax increase in 2011. If the debt isn’t paid off, the federal payroll tax hike will increase $21 every year until Indiana retires its loans.
Now the Indiana Manufacturers Association and the Indiana Chamber of Commerce have joined 35 state and national business groups to petition for an extension on the interest forgiveness on federal loans through 2012 and a waiver on the penalty collections and overall reduction of federal unemployment taxes.