Restructure Georgia’s Unemployment Tax System to Protect Employers and Working Families
FOR IMMEDIATE RELEASE
Americans agree that job creation is our number one priority. Almost half a million Georgians are pounding the pavement looking for work. These people – our neighbors and friends – face a job market where there are no jobs available for 4 out of 5 people seeking work. Even more painful for those who have lost their jobs through no fault of their own, the lifeline that has helped them stay afloat is in great jeopardy.
Massive employer underfunding of the unemployment insurance system over the past decade led Georgia’s unemployment system to become insolvent in 2009, and the state having to borrow more than $700 million from the federal government to pay regular unemployment insurance benefits that last 26 weeks at most. Now the Piper has come to collect. Georgia needs a plan to respond that will restore the system and protect employers and working families going forward.
Because Georgia had to borrow, Georgia businesses could be in for a shock at year’s end when they realize that their federal unemployment taxes increased by $21 per employee in 2011 to begin to repay our unemployment insurance loan from the federal government. This will continue to increase by $21 each year until the loan principal is repaid. This won’t be enough to eliminate Georgia’s debt to the federal government in the foreseeable future and will do nothing to restore Georgia’s unemployment insurance system to long-term solvency.
A taskforce assembled by Labor Commissioner Mark Butler may recommend ways for Georgia to address this situation. Thus far, their deliberations have been closed to anyone but Department of Labor employees and hidden from public view.
Any taskforce recommendations will come too late to avoid payment of the $22 million in interest on the loan due to the federal government in September. That $22 million payment will be paid by taxpayers, mostly from state Medicaid funds. Unlike Georgia, most states are paying this with a special assessment on the businesses that caused the need for the loan by underfunding the unemployment system for many years.
There is time to address Georgia’s need for a new plan for long-term financing of unemployment insurance benefits that will make future borrowing unnecessary and create a solvent, responsible, fair and predictable state unemployment system.
First, key stakeholders representing the Labor Department, employers and workers should be convened in a transparent process to identify changes to the financing system that will restore Georgia’s unemployment system to solvency.
- We need to move away from a system that relies on raising taxes when times are bad, to a system that receives and holds money for a rainy day when unemployment rises.
- Today, Georgia’s unemployment insurance taxes apply only to the first $8,500 of wages and are among the lowest in the country, placing a disproportionately heavy burden on low-wage workers. States that avoided borrowing during the recession have an average tax base of $18,000 – more than twice the level of Georgia.
- Georgia also needs to raise the minimum tax rate so that the 30-40 percent of employers who pay the system only $2.55 per employee each year pay their fair share.
Georgia could quickly return to solvency if the tax base were increased and all employers paid a low, reasonable rate.
Second, Governor Nathan Deal and state legislators can prevent this year’s tax increases by supporting legislation introduced in Congress by Senator Dick Durbin that would prevent the federal tax increases on employers in January and avoid the need to pay the interest due on the federal loan for the next two years. The legislation also could eliminate up to 60 percent of the state’s $720 million loan balance, giving Georgia a head start in replenishing its depleted unemployment trust fund. This is the only option to prevent this year’s tax increases and allow Georgia the time to work proactively on a solution that would be fair and return Georgia’s unemployment system to long-term solvency.
As we come together as a nation to create jobs, let’s not forget the safety net that protects hard working Georgians who lost their jobs through no fault of their own.
Elizabeth J. Appleyis an attorney in Atlanta and represents the League of Women Voters of Georgia on unemployment insurance issues at the State Capitol.
Clare S. Richieis a senior policy analyst with the Georgia Budget & Policy Institute, a nonpartisan nonprofit providing research and analysis of the state budget and the impact of policy decisions on Georgians.
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About the Georgia Budget and Policy Institute
GBPI is the state’s leading independent, nonpartisan nonprofit engaged in research and education about the fiscal and economic health of the state of Georgia. GBPI provides reliable, timely analysis of Georgia’s budget and tax policies, and promotes greater state government fiscal accountability, improved services and an enhanced quality of life for all Georgians.