State lawmakers last night approved a plan designed to fix the state’s bankrupt unemployment fund. It would dramatically raise taxes on employers and make administrative changes in hopes of saving money, but it would not cut benefits.
It passed the Senate on a bipartisan 46-3 vote, then passed the House 52-47 along party lines, with Democrats voting in favor and Republicans against.
The unemployment insurance fund has been spending hundreds of millions of dollars more in benefits than it has been collecting in employer taxes. The state’s jobless rate was 10 percent in March, its highest level since the recession of the early 1980s.
Indiana employers currently pay annual state unemployment taxes of 1.1 percent to 5.6 percent on the first $7,000 of an employee’s income. Employers with a history of layoffs pay more.
Under the bill passed last night, the taxable wage base would be raised to $9,500 and new tax rates would be phased in. Next year, the minimum rate would be 0.7 percent and the maximum would be 9.5 percent. In 2011, the rates would range from 0.75 percent to 10.2 percent.
There would be no cuts in benefits, something Democrats were adamantly opposed to, especially during a recession.
Sen. Brandt Hershman (R-Wheatfield) said some changes – including a phase in of higher tax rates – were meant to address concerns from House Republicans and the business community. Proponents said it was a responsible plan for ultimately fixing the fund and would allow companies, despite the higher taxes many would face, to remain competitive.
But several House Republicans blasted the plan.
“This is a huge increase on business owners,” said Rep. Jerry Torr (R-Carmel). “This is going to cause more people to be unemployed.”