Lobbyists for businesses and labor unions are debating a legislative proposal that would soften an unemployment tax increase for Vermont employers.
As the pandemic-induced recession drags on and the state’s Unemployment Insurance Trust Fund is drawn down, businesses are facing a steep hike in the taxes they pay into the fund, set to kick in on July 1. A proposal by the state Department of Labor calls for that hike to be frozen for a year.
The proposal, which is part of S.10, has sparked debate in the Senate Committee on Economic Development, Housing and General Affairs.
Business lobbyists have come out in favor of the department’s proposal on the grounds that the trust fund is healthy enough to warrant drawing out the tax hike and giving employers breathing room during the pandemic.
Labor lobbyists have countered that doing so would give businesses a handout without offering workers anything in return. After the 2008 recession, companies and workers shared the burden of restoring Vermont’s trust fund to health. Labor interests say the current situation calls for a similar arrangement.
David Mickenberg — a lobbyist who represents Working Vermont, a coalition of public- and private-sector unions, and the Vermont Building and Construction Trades Council — says if companies are allowed to delay paying more in unemployment insurance taxes, laid-off workers deserve an increase in benefits during the pandemic, as well.
Although Vermont’s unemployment benefits are high compared with other states, a roughly $500-per-week maximum payout still leaves people scraping by, Mickenberg argued.
“There has to be some acknowledgment that while employers are suffering, that employees and those that are on unemployment insurance are suffering as well,” he said.
Business lobbyists counter that an influx of federal pandemic relief dollars since the pandemic began has supplemented unemployment insurance benefits beyond what the state would normally offer.
“Given how significant that support is, I don’t see why additional state dollars need to go to benefit increases,” said William Driscoll, a lobbyist for the Associated Industries of Vermont.
Vermont businesses pay unemployment taxes at varying levels: Rates shift depending on a business’ status and the state’s unemployment tax schedule, which functions on a one-to-five scale.
The schedule is currently set at one, and is set to move to five on July 1. That means businesses would pay around $130 million more in unemployment taxes over a two-year period than they would under the labor department proposal. The proposal would freeze the rate schedule and the base wage on which employers pay taxes, and would limit increases in the schedule to occurring twice annually.
In pushing for the proposal, the department wanted to ensure that businesses would not be sunk by a massive hike in state unemployment taxes this summer.
“We’re hopeful that, as vaccines roll out, businesses will be able to bring their employees back to work. And the last thing we want to do in the middle of that is to overburden them with taxes,” said Cameron Wood, director of the labor department’s unemployment insurance program.
The Scott administration proposed and the House passed a bill last fall that sought to reduce businesses’ unemployment tax rate. But that legislative effort was shelved because of a lack of clarity around the trust fund’s financial health.
Now, with more certainty that the fund is healthy enough to push out the tax hike over several years, S.10 could soon be headed to the Senate floor. In addition to the tax proposal, the bill would extend unemployment insurance eligibility to certain people who were not eligible before the pandemic, such as those who need child care, and people who quit their jobs because of fear that their employer put them at risk of catching the virus.
The question of whether to accompany businesses’ tax reduction with greater worker benefits is at the forefront of discussion over the bill, and some legislators agree that continuing to bolster benefits to unemployed Vermonters should be a priority.
“We want there to be comparable relief to workers who depend upon the trust fund, which is going to be impacted by these tax rates,” said Sen. Michael Sirotkin, D-Chittenden, who chairs the economic development committee.
The committee has been working on a second proposal that would simultaneously delay the tax hike for employers, as recommended by the labor department, and increase unemployment insurance benefits by 20% between July 2021 and June 2022.
An analysis by the labor department projects that both the administration’s and committee’s proposals would cause little change in the projected balance of the fund 10 years from now, compared to the fund’s base status.
While Driscoll and other business lobbyists argue that the proposal would simply delay the arrival of money employers pay into the trust fund, Mickenberg maintains that would still leave more cash in employers’ pockets in the interim.
“It is a use of fund dollars,” he said of the proposed delay. “Now, they’re future fund dollars that haven’t been realized yet, but it is still a use of fund dollars to help a certain constituency: the employer community.”
Meanwhile, the labor department is concerned that the discussion about benefits could once again sink the effort before the end of a legislative session. The department supports increasing benefits, Wood said. He also believes that alleviating employers’ tax burden would ultimately have a net-positive impact on workers, and wants to prioritize that.
“Our biggest concern right now is getting this done immediately,” Wood said. “We’re happy to have other conversations about benefits, and whether benefits are appropriately aligned, given the circumstances we’re in. But for us, it is a challenge to attach those two things together if there’s going to be a delay in getting the bill passed.”
And while some legislators see the merits of higher benefits, others aren’t on board. With more federal unemployment relief on the way as Congress nears consensus over a new Covid-19 relief bill, increasing state benefits isn’t necessary at this point, said Sen. Randy Brock, R-Franklin.
“When we take the benefit that we have for unemployment and then supplement it again substantially with federal funds, I’m not sure it makes sense to increase the state benefit further,” said Brock, the chamber’s minority leader and an economic development committee member.
The question of whether to increase benefits in the months ahead holds particular weight for women who file for unemployment insurance benefits. At one point, 73% of people collecting regular unemployment benefits in the state were women.
“Given that, I think it’s incumbent upon us to think about what kind of permanent damage could occur to the workforce if we’re not better supporting those Vermonters experiencing unemployment,” said Sen. Kesha Ram, D-Chittenden, another member of the economic development committee.
The panel is set to continue deliberating S.10 this week, as the March 12 crossover deadline approaches.
