A major company adding 1,000 more jobs in South Carolina would have thought twice about their investment if they knew they would pay high unemployment fund taxes this year. That’s what a manufacturing industry spokesman told state senators Tuesday in Labor, Commerce and Industry hearings.
Lewis Gossett of the SC Manufacturer’s Association testified to the Senate subcommittee about the impact of higher unemployment taxes levied on companies in order to pay off the state’s almost billion dollar debt to the federal government. The new law set up 20 tiers of businesses to pay on different scales based how much the company has used the unemployment system.
I think given the information you had available to you at the time, I’m not one to criticize that general approach. I do believe the system has to go where the money is, it has to where some employers are to find a billion dollars and unfortunately a lot of my folks are those people. But if we’re at the point we have to find it, it does constrain us–significantly.
Sen. Thomas Alexander chairs the full Labor, Commerce and Industry Committee and has been following this issue closely:
Dealing with the unemployment tax is one of the most pressing issues we’ll be dealing with in my opinion this year because it has such a far-reaching impact on the ability of business and industry to come out of this recession. We all understand on the importance of paying back money that we borrowed from the federal government. The committee did a great job last year of trying to put together a proposal, but at the same time there are unintended consequences.
Under the new law, some companies saw no increase in fees, while some saw a 300 percent hike, meaning some are now paying up $1100 an employee.
Senate subcommittee member Larry Martin of Pickens says,
The big concern that I have is knowing what I know about how manufacturing operates, a lot of companies reserve some money, put aside some money to try to prepare for it– but this is without precedent. The size of the bills that came, there’s no precedent for it and those bills, those invoices have to be paid pretty soon.
The problem, say business leaders and some legislators, is that companies did not really know in which payment tier that they would be placed by the government formula.
General John Finan, head of the Department of Employment and Workforce disagrees that businesses did not know the costs that were coming:
This debate took place a year ago and all the charts were shown with the rates, including the highest rates a year ago in April when they debated the bill. I think more likely is the companies did not know what tier they would fall in. The chart was there one through 20, the highest rate was this, the lowest rate was that but the companies weren’t quite sure what tier they would fall in.
The bills to South Carolina businesses came in late January.
Sen. Alexander as the states competes in the global marketplace, says South Carolina should be helping companies create jobs, not hindering them.
Businesses and lawmakers are trying to find a solution. Senators like Alexander are working with the Departmentof Employment and Workforce to create different scenarios to see how to recalculate the fees more fairly.
SC DEW Director John Finan says South Carolina is in a good position and ahead of neighboring states in trying to solve this unemployment insurance debt to the federal government. “North Carolina has a $2.2 billion; they haven’t addressed it yet. Georgia has a problem; they are just now starting to address it,” says Finan.
Lewis Gossett of the Manucturer’s Association offered a solution to the Senate panel:
Now that we know what the impact is and how it is affecting real world business decisions, see if there is a way that we can at lease mitigate that pain. Now I was told by a member of the General Assembly–I think it was a fair statement–that “you guys just want to put it off.” For those of you in manufacturing, that’s usually the way it is. They do want to put off expenses as much as they can, but they understand there is some of this that cannot be put off.
The subcommittee is holding hearings all week to hear testimony from different companies affected by the new unemployment tax increase.