Biz leaders relieved over one-year payroll tax-hike delay

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Hoosier business leaders are breathing a sigh of relief this morning over legislators’ agreement Saturday to delay a $400 million payroll tax increase for a year. The tax hike, brokered in 2009, was meant to shore up Indiana’s bankrupt Unemployment Insurance Trust Fund.

Even so, the state’s most troubled employers won’t avoid paying the taxman more this year.

“The first thing that people need to know, a number of people will get increases, even though this was delayed,” said Indiana Manufacturers Association President Pat Kiely. “Because there were increases built into current law.”

For a decade, Indiana has spent more on unemployment insurance benefits than it drew in taxes every year. As a result, its unemployment insurance trust entered 2010 $1.6 billion in debt to the federal government. By the end of this year, Indiana’s debt is projected to top $2.5 billion.

Employers contribute payroll taxes to underwrite the trust. Their tax rates now range from 1.1 percent to 5.6 percent.

Last year, the General Assembly passed the $400 million hike to begin paying off the growing debt. Under the new law, the highest payroll tax rates would have topped 12 percent. And Kiely said the tax hike would have slapped industries hardest-hit by the recession, such as construction, manufacturing and retail.

But even under the old law, which remains in affect due to the one-year delay, rates were based on every employer’s individual history of layoffs. So businesses that trimmed their headcounts last year will see payroll taxes increase this year.

“This recession has hit a lot of folks,” Kiely said. “And it’s both small and large companies.”

It could have been worse. Indiana Chamber of Commerce executive George Raymond pointed out that Elwood-based Red Gold Inc. projected its payroll taxes would increase from $400,000 to $900,000 in 2010, if legislators hadn’t agreed to the delay. Similarly, Raymond said, Indianapolis-based Centaur Inc., the bankrupt owner of the Anderson-based horse track and casino Hoosier Park, had projected a payroll tax increase between $900,000 and $1 million.

Raymond said business groups will use the one-year delay to explore securing federal help with Indiana’s unemployment insurance problem. Indiana isn’t alone in its dilemma. By 2012, he said, as many as 40 states collectively are projected to be about $90 billion in debt for unemployment insurance benefits.

“It’s not just an Indiana problem,” said Raymond, the Chamber's vice president for human resources and labor relations. “It’s a national problem.”

Given the growing enormity of their unemployment insurance debts, Hoosier business leaders hope Uncle Sam will eventually have to offer states some kind of bailout.

“We’re not asking for a free ride here. We’re trying to come up with a rational way to deal with it, and still do business in Indiana,” Kiely said. “It’s going to be a real balancing act.”

None of the bills legislators passed late Friday or Saturday have reached Gov. Mitch Daniels desk, said Daniels spokeswoman Jane Jankowski. It usually takes a day or two following adjournment for bills to be gathered and presented to Daniels for approval. Jankowski said Daniels will review every bill, but does not currently plan to veto any pending legislation.

Both the Indiana House and Senate passed a conference committee report for HB 1336, which overhauls the Indiana Public Deposit Insurance Fund to protect state and local governments against losses due to bank failure. State Rep. Jeb Bardon, D-Indianapolis and the bill’s author, said the governor should be satisfied with HB 1336, which Daniels’ Office of Management and Budget helped craft.

“We went over it and over it,” Bardon said. “This is the bill they wanted.”



  • Unemployed not all that bad...
    I am assuming that you have a job. Many if not most unemployed people would like to be working rather than not. Additionally, not all unemployed people receive unemployment checks. I, for one, am not eligible for unemployment since I had to voluntarily quit my job just before the economy tanked. That left me with no job openings and little opportunity. Many unemployed have sent out hundreds, I have sent out over 200 resumes and have yet to be able to find a job. My search includes low paying or minimum wage jobs(for which I am told I am over-qualified), on-target jobs (for which I am either not specifically qualified for because the requirements are so specific that no one ever is), or, and this is most cases, jobs that I never ever ever hear back from even to simply acknowledge receipt of my resume. When I do hear back, often the response is "we are just taking applications now, not actually hiring yet". It is very easy to simply believe that the unemployed are lazy or somehow looking for a handout. If I were you I would look deep inside and search for some compassion, be thankful you have a job and count your blessings, and realize that the country as a whole got into this mess, and the country, yes the employed as well, need to do whatever is needed to get out of it.
  • Broken System
    In my opinion the debt is out of control not because the tax rate is too low, but because our States' system is broken. I've seen one too many cases where unemployed individuals wait until their unemployment benefits expire before they get serious about looking for employment. It's amazing how quickly people get back to work when they don't have a check coming in the door from the State. Based on my experience in the employment business, I would predict that the average unemployed individual spends less than 10 hrs a week looking for work. Why not ask these folks to volunteer their time to a government agency or a worthy non-profit for the remaining 30 hours in order to receive their unemployment benefits. Who knows, maybe they might meet someone who can connect them with a job.

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