Workers, Employers Take Hit Under Deficit Propoosal

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(Host) Workers – and their employers – will both take a hit under a proposal to fix a looming deficit in the state’s unemployment insurance fund.

Workers who lose their jobs would see cuts in their benefits. Businesses would have to pay higher taxes to shore up the fund.

As VPR’s John Dillon reports, no one is happy about the proposal.

(Dillon) Gilles Moreau owns beverage stores in Barre and Lyndonville. He was driving around northern Vermont this week delivering inventory before hurrying back to Montpelier to testify on the unemployment fund issue.

In between stops, he took a few minutes to explain how a hike in the employers’ tax could affect his small business.

(Moreau) "I’m already taxed to the max. You know, they’ve got to come up with another way to fix this fund."

(Dillon) Companies now pay unemployment tax on the first $8,000 of a worker’s wages. The Douglas administration would collect more taxes by raising the base wage rate.

Moreau said the recession is already hurting his business, and that he’d have to pass on the cost of a tax increase by cutting jobs or raising prices in his store. He now employees 25 full- and part-time workers, but he had to lay off someone just recently.

(Moreau) "The problem just seems to never end, and I think we’ve got to come up with a better way. I think it has to come with some cuts somewhere, and it seems to me this is a tax that’s going to hurt small guys especially."

(Dillon) But the administration’s proposal is also unpopular with workers because it does include cuts in unemployment benefits. The proposal would cap benefits eventually at $409 a week.

(Potvin) "You know, we’re seeing our guys that have worked for 20, 25 years getting laid off. They’ve never been laid off, they don’t even know how to call unemployment."

(Dillon) Jeff Potvin is business manager for the Plumbers and Pipefitters Union. He says the recession has slowed work in the construction trades. So he says a cut in unemployment benefits would come at the worst possible time.

(Potvin) "Employees have shared the pain, and they’re sharing the pain by being laid off."

(Dillon) Potvin says the burden for making the fund solvent should fall on businesses, because the state hasn’t hiked unemployment taxes in years.

(Potvin) "They have been getting away with not paying their fair share over the past 25 years. They have been at $8,000 for at least that long, where it should have gone up with wages incrementally."

(Dillon) The state’s unemployment fund has been paying out more than it takes in for several years. Labor Commissioner Patricia Moulton Powden says the state will soon have to borrow money from the federal government to keep paying claims. She says that money will be paid back with interest raised through a federal tax on employers.

Powden says the fund can eventually be made solvent through a combination of higher state taxes and cuts in benefits.

(Powden) "We have to raise taxes, unfortunately, and we have to cut benefits, unfortunately. But the benefit reductions we’re talking about would still leave us at or above the national average in almost all our benefit structures… And the taxable wage base would bring us up close to the national average, also."

(Dillon) Powden acknowledges it’s a bad time to for both businesses and workers. But she says delaying action carries the risk that the fund won’t be solvent when the next recession hits.

For VPR News, I’m John Dillon in Montpelier.

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