Debt-cutting measure could mean fewer unemployment benefits

Posted December 5, 2012

Future unemployment recipients in North Carolina could receive fewer benefits under plans a legislative committee will review today.

North Carolina owes the federal government $2.4 billion the state has borrowed to pay first time unemployment claims. Under federal law, the North Carolina taxes companies pay toward funding the unemployment insurance system will rise in order to help repay that debt. Lawmakers fear those tax increases could be a drag on the state's economic recovery.

The Revenue Laws Study Committee, a group of House and Senate lawmakers, is expected to roll out a plan to repay that debt more quickly today (Wednesday). As the Associated Press reported last month, that proposal is expected to reduce the benefits workers receive when they lose their jobs.

According to a draft agenda, the committee will hear about plans to refinance the unemployment debt. Refinancing the debt could help pay it down faster, but it's unclear if the state has enough "capacity" to borrow the needed money.

Liberal activists worry that the deal, crafted by conservative lawmakers, will help avoid higher taxes for businesses at the expense of the unemployed. (See copy of release below).

“The changes to the unemployment insurance system being pursued by Revenue Laws Committee members will significantly reduce benefit amounts and the duration of benefits while doing nothing to address the long-term financial footing of the unemployment insurance system,” said Bill Rowe, director of advocacy at the North Carolina Justice Center.

But business leaders, including the North Carolina Chamber of Commerce, have pushed lawmakers to address this problem.

"The additional tax burden with a status quo repayment approach could represent an unsustainable increase in total unemployment insurance taxes for businesses, threatening what is needed most, jobs for North Carolinians," said Gary Salamido, vice president of government affairs for the North Carolina Chamber, in testimony to the committe earlier this year.

The committee meets at 9:30 a.m. If it does reccomend legislation, it will have to be heard and passed when the full General Assembly returns in January. Rep. Julia Howard, R-Davie, told WRAL-TV Tuesday that she expected lawmakers to take up a bill that is basically the same as what the committee will approve today.

Governor-elect Pat McCrory, a Republican, has said that addressing the unemployment debt one of his top priorities and something he'd like to do early in his term.


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  • beachboater Dec 5, 2012

    They have already raised the UT rate. I've been business for over 20 years, NEVER had a claim filed against me, and my rate went up this year.

  • junkmail5 Dec 5, 2012

    Of course it worked generations ago, because the tax rate had not be lower. Once the investors are used to a 15% tax rate, why would they be excited about 30%- Bartmeister

    Excited is irrelevant. It would still be a _lower_ rate than direct income tax, so they'd STILL be better off investing it long term than any other alternative.

    They would continue to invest because it would still be the best option.

    As history shows.

    They were 91% under Eisenhower, 74% under Kennedy trayNTP

    Nobody paid anywhere near those rates though- because almost everything was deductible.

    If you look at the actual rates the rich paid it was pretty steady in the mid 30% range for most of the last 60 years, until the Bush cuts...when it dropped several points under 30% for the first time in modern history.

    Returning to the Clinton era marginal rates, an especially the clinton era cap gains rates, would put us back where we were for pretty much everyone on heres lifetimes except the last 10 years.

  • Bartmeister Dec 5, 2012

    Plenty-"And capital gains tax rates could easily be 30-40% rather than 15% "

    nancy-"And the purpose of investing would be what, then?"

    To make money, like every job out there. Plenty Coups


    Easier said than done. If you are in a position of investing money, and the government comes in and says they're gonna double your tax, reduce your return, increase your risk then why would you do it? It's not about making money, it's about the percentage of return that investors largely look at. The same could be said on a smaller scale, invest for a 10% return or put your money in a safe bond or bank at 1/3 the return. Why?

  • trayNTP Dec 5, 2012

    re junkmail5. I'm not "confusing" it. Middle and low-income people pay more in taxes as a proportion of their income than the wealthiest do.

    re cgpvnp. I was making a GENERAL point, not trying to exact. The point isn't what the actual rate is for teachers, but the fact that for the last 30 years, the tax burden in this country has been steadily shifted from the wealthy to workers. Income has skyrocketed for people at the top, along with "production", but the people actually doing the work, actually "producing" for companies and organizations, their pay is stagnant or decreasing if you account for cost of living increases and inflation.

    I'm not sure if the three of us are disagreeing, overall. I agree capital gains should be treated like income. I also believe that the top marginal tax rates should be much higher than even the Clinton era rates. They were 91% under Eisenhower, 74% under Kennedy, now people are complaining about them being in the 30s b/c GOP voters are easily duped.

  • Rebelyell55 Dec 5, 2012

    They still haven't "unfrozen" it though they did give a 1% "raise" but then adjusted the Step pay so that some teachers actually made less. Benefits have been slashed as well so what on earth are you talking about?

    Plenty Coups
    December 5, 2012 10:20 a.m.....Elected officals, exc. in goverment, those who are way over paid. Look at the raise that our state Treasury gave out to her people. Yet those who do the actual labor, teacher and such, don't get nothing. A 5% across the board pay cut by the top officals, and cut in benefits would cover this bill in the next two years.

  • Bartmeister Dec 5, 2012

    Investments don't fund businesses' operating costs... they fund the pockets of the executives, board, cronies etc. Issac Ishmed


    Well that's not completely true, but execs and boards control business. Again, eliminate the incentive and reward and you eliminate a lot of revenue producing streams.

  • junkmail5 Dec 5, 2012

    Doesn't matter what you do or try to do to fix the situation when PROPAGANDA is driving a mass of ignornant poor government dependents through envy.- Thought Criminal WS


    "Contrary to "Entitlement Society" Rhetoric, Over Nine-Tenths of Entitlement Benefits Go to Elderly, Disabled, or Working Households"

    You know, those lazy, lazy elderly...

  • Bartmeister Dec 5, 2012

    No, it's not.

    You can tell because there was tons of investment for the last several generations when the tax was in that 20-28% range I mention (or higher if you go back before 1980). As long as the long term cap gains rate is LOWER than the marginal income tax rate there's a significant incentive to invest.... even if it's "only" 10-15% lower instead of the current 20% lower. junkmail5


    Of course it worked generations ago, because the tax rate had not be lower. Once the investors are used to a 15% tax rate, why would they be excited about 30%, even if that was the way it was 20 years ago? Bottom line is small business needs investors. Find a way that entices investments and doesn't penalize the risk people take. If you were talking a few percent of some step tiered process, it might work. But to double overnight is not the answer. Or at least won't be for me.

  • pappybigtuna1 Dec 5, 2012

    I know of several people that are "double dipping", receive unemployment money and do side work for "cash". These jobs are easy to get, the employer does not pay taxes, insurance, bookkeeping and so on.

    A 15.00 per hour jobs without SS & Income taxes nets the worker about $20.00 per hour spending power.

    I only know a few of these theives, how many do you know? We are paying for this crime.

    How many are swapping contact info pages, so no one has to go look for a job? Bet you know a couple of those people.

    Dishonesty is promoted, under the blanket, "everyone does it"

    Something to think about, when the teachers gets there 2 1/2 month out of school thing, they have enough time to fill for unemployment benies, and get 6 checks of unemployment, good deal, huh!

  • Plenty Coups Dec 5, 2012

    Plenty-"And capital gains tax rates could easily be 30-40% rather than 15% "

    nancy-"And the purpose of investing would be what, then?"

    To make money, like every job out there.