The Mountain Times

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Unemployment insurance tax is punitive to those who suffered the most

You may or may not be familiar with HR.169 and S.90, a house and senate bill regarding Unemployment Insurance tax increases that businesses are now responsible for after the Irene flooding in 2011. It is important because there are serious shortcomings of this legislation that may seriously affect you and/or your community. The bills allow for businesses to apply for only eight weeks of relief for the events from 2011 and a mere four weeks for future events.

While we are ever grateful to Alison Clarkson and Dick McCormick who worked hard to get some form of legislation written to help businesses, their outstanding efforts fell short. 

The reality of Irene continues to impact our businesses throughout the state.

Here at Woodstock Farmers' Market (WFM) we face many continuing expenses: our machines were fixed minimally due to lack of funds at the time; and they are now breaking down. Drainage issues on the property were fixed this spring due to bank repair and flood damage. We have a myriad of loans we will need to pay back over the next few years both from the State and from customers. And, since last July, due to the fact that we laid off our staff for 12 weeks after Irene devastated our store, the State seemed compelled to count that as regular unemployment pushing our UI rating that was just 1.1 before Irene (the lowest a business could have) to 6.4.  That impact has meant each quarter we are paying the state an additional $10,000 in unemployment taxes. All this help up by an economy that is still fragile.

OK. We get it. The state is broke.

Soda taxes, water taxes, gas taxes and all the other taxes that were pending in Montpelier were designed to spread the hurt. But jeez, higher business taxes because an act of God? WFM has been dutifully paying UI insurance to the state for over 20 years. To boot, what we've paid in over that 20 year period is a far cry from the 12-week payout during Irene.

The Senate Bill proposes eight weeks of relief. That means we are still responsible for four weeks (we were closed for 12); that four weeks is now tacked onto our new UI rating for the next three years. Basically we are helping to fund the shortfall-in a recovery mode-while a business up the street affected by Irene for, say three weeks, continues to pay their rightful UI rating based on their real unemployment situation, not including their Irene layoffs.

Is this good policy?

Further, there are no funding mechanisms in the bill to pay for the proposed eight weeks of relief, but rather the language is crafted such that businesses have to apply for it. Boy, a bitter pill to swallow and more bureaucracy. I cannot tell you how much that stinks. We need the cash now as we are still in recovery mode.

The outlay of cash continues for all of us employers who had their rating changed. Since last July 1 when the rating changed, The Woodstock Farmers' Market has incurred over $32,000 in additional expense! That is more than our budgeted net profit for the year as we continue in recovery mode.

But what's even most curious and off-putting is that both the Senate and House solutions provide little relief for future events. Both bills put a four-week maximum on any UI relief in the event of future disasters. In other words, if a business were forced to lay folks off for 20-weeks due to extreme storm damage, they will only be "covered" for four of those weeks-plus would have their UI rating skyrocket, having to absorb the other 16 weeks for three years, a similar situation to WFM now. And another employer - up the street perhaps, with less damage that only closed four weeks gets full coverage and no UI increase.

It seems a bit unconstitutional, if I may be so bold, and it is punitive to those who suffered the most.

Just to be clear, it is worth examining other states affected by federally declared disasters. I found that most states have no minimum or a cap on UI relief. Businesses that opened back up went right back to their regularly calculated UI rating without the staff laid off being "added" into their rating.

We believe a forward-thinking approach for future events would have been the following: To raise everyone's UI rating a small amount, (say 1/10 of one percent) so that everyone was paying more into the pool now. The percentage could be readily calculated using Department of Labor wage numbers. This increase could be used to pay for the expense (that we suppose the Legislature is pulling from the general fund) now and for the future federally declared disasters. Every business in the state has some stake in this as a disaster can strike anyone. Instead, when that future calamity occurs, the legislature will be scrambling to find the dollars to pay for it.

Everyone understands there is likely to be another federally declared disaster at some point. Maybe even this year. Businesses will close and people will be laid off. We feel that this entire debate will start all over again as businesses that don't open within four weeks will suddenly see their UI ratings go up and their tax dollars rise.

Shame on Montpelier for not dealing with this issue in a more equal and common sense way now, when the iron was hot.