Proposal for higher unemployment taxes divides Tenn. House

GOP is concerned that strategy to shore up unemployment trust fund places too great a burden on small businesses By Erik Schelzig • ASSOCIATED PRESS • April 22, 2009 A partisan fight erupted in the House on Tuesday over efforts to shore up Tennessee's unemployment trust fund by raising taxes on businesses. Democratic Gov. Phil Bredesen, the leadership of the Republican-controlled Senate and state business groups have agreed that increasing the unemployment tax is preferable to triggering a federal takeover of the fund, which could run out of money amid a jobless rate that is approaching 10 percent. A bill advancing in the Senate is meant to stave off bankruptcy for the fund by increasing the amount of an employee's wages subject to the unemployment tax from $7,000 to $9,000 and raise the tax rate by 0.6 percentage points. But Republicans in the closely divided House are balking at the plan. "There's got to be a better way than putting the entire burden on the small-business man, because the result is it's going to run him out of business and lay people off," said House Republican Caucus Chairman Glen Casada of Franklin. The move, which would increase employers' unemployment taxes by about $110 a year per employee, comes as employers are faced with paying a higher rate brought on by the rapid rise in unemployment claims. About 113,000 people in the state were certified to receive unemployment checks last week, the Department of Labor and Workforce Development said. But supporters nonetheless say higher unemployment taxes are the only way to save the state's unemployment trust fund from bankruptcy. The fund's balance has fallen to $131 million in mid-April from $468 million a year ago, the department said. Jim Brown, state director for the National Federation of Independent Business, which advocates for small and independent businesses, said his organization continues to support the governor's tax plan but will hear out negotiations. "The bill, as is, we support because the alternative is worse than not passing it, but there may be ways that they're talking about making it a little better," he said. "We'll look at that if they put ideas on the table." GOP support sought Some lawmakers and business groups had proposed a month ago using some of the money that the state will receive through the federal stimulus plan to put off or reduce the tax increase. Bredesen ruled out that option, saying it would do little more than push the need to take action back by a few months. House Democratic Caucus Chairman Mike Turner says his members are willing to support the tax increase, but only if a significant number of Republicans vote for it, too. Republicans hold a 19-14 advantage in the Senate and a one-seat majority in the House. "This is the right thing to do," said Turner, of Old Hickory. "The feds could come in and make it a lot worse." "Occasionally you have to do things you're not comfortable with," he said. "I think their goal is to use this against us in election campaigns." Casada said his resistance is not a political ploy. "Mike needs to quit worrying about politics and worry more about public policy," he said. "I told him that some of us just have heartburn about this." House Republicans want to look at what other states are doing before resorting to the tax increase on employers, Casada said. "Here I am in a position saying, 'I don't like what we're doing, but I don't have an answer.' And I don't like where I am," Casada said. "We're not going to be obstinate, we're not going to hold it hostage, it's not a political thing."