New state budget eliminates special employer tax

CAPITOL CONNECTION
Joe Leibham • 9th Senatorial District

One concern that has been frequently shared with me as I have visited with local businesses over the past couple of years is the new tax or “assessment” that is being levied on Wisconsin businesses to pay for the state’s unemployment loan obligations.

During the recent economic downturn, Wisconsin has been required to pay record numbers of unemployment insurance claims. Because the necessary revenue to support these claims exceeded the money available in Wisconsin’s Unemployment Insurance Reserve Fund, Wisconsin was required to borrow money from the federal government to support continued payment of unemployment compensation throughout the recession.

Initially, the federal government waived interest on outstanding principle from these loans. However, beginning in 2011 and continuing since, Wisconsin has been required to pay interest on outstanding loans from the federal government to stabilize our Fund. In September, 2011, our interest payment was $42.3 million. In September, 2012, our interest pay- ment was $35.8 million. Future interest payments are currently projected to total $19 million in September, 2013 and $7 million in September, 2014.

Under existing law, Wisconsin has financed these interest payments through a Special Assessment for Interest (SAFI) on Wisconsin employers. Essentially, Wisconsin employers of all sizes have been required to pay a new tax to fund these interest payments at the very time many of them are struggling to survive and make payroll. This assessment has hit employers indiscriminately- even those with individual unemployment reserve fund balances that are positive are required to pay. Most concerning, small businessmen and women who have foregone their own salary so that they didn’t have to lay-off employees are being required to pay this assessment.

These assessments, leveled on employers on a per-employee basis, make it more difficult for businesses to hire more employees, make capital investments and generally expand. Because of my concern for the negative impact this tax is having on our business climate, I have been working for the last two years on trying to find a way to end it. Unfortunately, federal laws allow very few payment options.

In April of this year, after much consideration and discussion, I authored a bill to appropriate state taxpayer money, known as general purpose revenue (GPR), to pay this interest instead of requiring individual businesses to pay this tax. The unemployment problem confronting our state and nation is not an employer or employee problem but an overall societal economic problem of which we can all help provide a solution.

Under the proposal I authored, individual businesses will still be required to make payroll contributions on behalf of their employees to support general unemployment benefits, just has always occurred. However, they will not be responsible for covering interest Wisconsin has accrued on federal unemployment loans.

After introducing this proposal as a bill, I was pleased to work with other members of the Joint Finance Committee (JFC) to include this item in the budget bill. Ultimately, after working to educate my colleagues on the impact this assessment was having on businesses across the state, JFC voted to include a provision similar to the bill I introduced into the budget. This provision was included in the budget bill signed by Governor Scott Walker and is now law. As a result, the state will contribute up to $30 million over the next two years to cover the SAFI on behalf of Wisconsin employers and employees. Based on current projections, this will be sufficient to prevent employers from having to worry about making additional SAFI payments for the foreseeable future.

In making this announcement on its website at: http://dwd. wisconsin.gov/ui/safi/, the Department of Workforce Development (DWD) noted that this provision will save a typical employer of 100 employees $1,040 this year and $378 next year. This is money that can be directly invested into growing and expanding businesses in Wisconsin, increasing payroll, and creating jobs.

I have been pleased to advocate for this initiative over the past few years on behalf of small businesses around the state, and am glad that my legislative colleagues have decided to support my efforts to include this item in the budget bill. This provision, along with many others is just another example of how the legislature and Governor are working to make Wisconsin more friendly to job creation.


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