Local News
6:13 pm
Wed December 5, 2012

N.C. Proposal Slashes Unemployment Insurance, Raises Taxes

Republican legislators in N.C. have unveiled a plan that slashes unemployment benefits and raises taxes for some businesses.
Republican legislators in N.C. have unveiled a plan that slashes unemployment benefits and raises taxes for some businesses.
Credit Bytemarks/Flickr

Republican state legislators unveiled a plan Wednesday to reduce unemployment benefits and raise taxes on some businesses. They say those are necessary steps to pay back the nearly $2.5 billion the state owes the federal government for help paying unemployment insurance.

During the deepest part of the recession, North Carolina's unemployment insurance system got way out of balance. Businesses fully fund it, and they weren't paying enough in to cover the money going out to a rapidly growing number of unemployed people.

The state had to borrow more than $2 billion from the federal government. The plan released Wednesday aims to pay that back by late 2015. Republican Representative Julia Howard of Davie County says you do that by spreading the pain.

"That's what we're trying to do - not put unequal portions on any one entity, though it probably ends up that the business community has the lion's share of what's there," Howard said.

Increased Taxes

The federal government automatically increases taxes on businesses each year until the debt is paid off. Beginning in January, they'll pay an extra $42 per employee.

On top of that, the plan would increase state taxes slightly and ask all businesses to pay into unemployment insurance. As of now, some that don't have a history of layoffs don't pay anything.

"Yeah, we're shouldering a significant part of the burden," said Gary Salamido of the N.C. Chamber of Commerce. He said he's actually OK with the plan though.

"We were part of the reason that we got into this, and we're going to do our part to get out of it," Salamido said.

In the 1990s when times were good, the state cut taxes for businesses. Salamido said that contributed to the system getting so far out of balance, and now businesses recognize there'll be some pain to make the system solvent. 

Slashed Benefits

The plan also calls for significant pain for the unemployed. The state would slash the maximum weekly benefit from $535 to $350, and it would cut the number of weeks it offers unemployment payouts from 26 weeks to 20.

Bill Rowe is the director of Advocacy at the N.C. Justice Center.

"As I look at it, it doesn't look like employers are paying the lion's share, but that unemployed workers will be paying the bulk of it and will be paying the bulk of it for years to come," Rowe said.

Here's what Rowe means on the "years to come" part: businesses would only have to pay higher federal taxes until the debt is paid off. But the cuts to benefits would be permanent. 

Rowe said he's not against some reduction in benefits. But he said these cuts are too much.

"We're very disappointed, and we think that it's misguided," Rowe said.

The Republican plan will be introduced in the General Assembly when it convenes in January.