South Carolina legislators say they have found a solution to avoid hiking unemployment taxes on some companies. However, there is a catch for those who would receive jobless benefits.
South Carolina has to pay back nearly $1 billion it borrowed from the federal government for unemployment benefits last year. In order to raise the money, the state began using a new tier system to charge higher unemployment taxes against companies that have laid off the most employees. However, some businesses complained their new rates nearly tripled. Under current law, employers in the top tier will have to pay more than $1,000 per employee.
Higher-than-expected revenues this year gave legislators an option to reduce the rates by 18 percent across the board. The House passed a bill Wednesday that would lower the rates for businesses by contributing over $105 million in additional tax revenue to help repay the loan.
That drew concern from some members, as part of the deal requires trimming six weeks off the amount of time a person could receive unemployment benefits.
House Majority Leader Kenny Bingham (R-Lexington) worked to craft the new bill with Minority Leader Harry Ott (D-Calhoun). Bingham said he was uncomfortable with reducing the jobless aid, but said he felt the 73 weeks of extended benefits currently offered by the federal government offers enough cushion for those seeking jobs.
With the additional benefits, that we’ve been able to extend it out to 99 weeks, I think it is a compromise that may not be the best in the world, but it is one that is acceptable under the current circumstances to me.
Bingham said if the state didn’t provide relief to businesses, those companies would likely lay off more employees to avoid paying the additional unemployment insurance. At the very least, he worried, they would freeze any new hiring.
The bill passed on 87-20, with 20 Democrats and all Republicans voting in its favor. However, a bloc of lawmakers led by Rep. Gilda Cobb-Hunter opposed the bill, saying it was unconscionable to cut jobless benefits and only help businesses.
Cobb-Hunter said it was another example of the state reacting to a crisis, rather than working proactively.
I just really am hoping that one of these days, before I leave this chamber, there will be deliberate thought and deliberate action on what we do here. We are where we are because we have rushed this thing.
Ott said it was not an ideal scenario, but added not acting would make the unemployment problem worse.
If we don’t fix this problem… those businesses are going to be faced with a 200 to 600 percent increase. The largest increase, that I’m aware of, that we’ve ever asked the business community to take.
Ott said he and other legislators voted for the original changes earlier this year He says he did not realize just how much it would impact companies that released employees in bulk after the economy crashed in late 2008.
The Senate set aside the $105 million in the state budget, anticipating the tax-relief bill. However, House leaders say they want a larger number. House Speaker Bobby Harrell (R-Charleston) said the House would try to shift spending around and instead provide $147 million.
Leaders on both sides say they expect to quickly pass the enacting legislation out of the Senate next week. Since the $105 million is a one-time payment on a massive unemployment debt, legislators will have to approve new payments in the ensuing years until the balance is fully paid off.