Employers May Face Tax Hikes Under Indiana Jobless Fund Proposal

Employers would pay higher taxes under a revised proposal Indiana House Democrats presented as a way to fix Indiana’s bankrupt unemployment insurance fund.

The taxes employers would pay into the fund overall would be higher than House Democrats originally proposed, at least initially, and the new plan still would not cut benefits paid to the jobless.

Republicans who control the Senate have proposed a plan that they said was balanced because it would increase employer taxes, reduce benefits for most jobless claimants and tighten eligibility standards. The parties are trying to negotiate a compromise by the April 29 deadline for adjourning this year’s session.

Rep. David Niezgodski, D-South Bend, said the revised House Democrat plan would fix a fund that has been paying out hundreds of millions of dollars more than it has been collecting in employer taxes. The fund has borrowed more than $700 million from the federal government to stay solvent, a figure that could top $1.2 billion by year’s end.

Sen. Dennis Kruse, R-Auburn and the top Senate Republican on a House-Senate conference committee on the issue, did not criticize the new House Democrat plan, even though it would not lower benefits. He said the two sides now have plans to negotiate from.

Partisan squabbles prevented the original House proposal from passing that chamber, so Senate Republicans had to come up with a bill from scratch.

Under the current system, employers pay between 1.1 percent to 5.6 percent annually on the first $7,000 of an employee’s income. Those with a history of laying off workers pay higher rates.

The new House Democrat plan would impose a one-time surcharge on employers this year, and raise tax rates from a low of 1.8 percent to a high of 10.2 percent. The wage base would initially be $14,000, but decline on a staggered basis as the fund rebounded. Once the federal loans were paid back and the fund had a surplus of $400 million, the wage base would decline to $9,000.

Niezgodski said the tax increases would raise about $1 billion per year. He estimated that other proposed changes to the system would save the fund $319 million to $390 million a year.

He said much of that would be from requiring companies who for several years have unemployed workers who draw more in benefits than their companies pay into the system to reimburse the state for much of those benefits. The plan also would close loopholes some companies use to avoid paying taxes.

Niezgodski said talks would continue over what he called an extremely pressing problem.

“We are going through a very difficult process,” he said. “It is unusually difficult.”

He also said a deep recession was not a time to be cutting benefits