Some see unemployment tax reductions as unlikely this year 

Posted: 7:00 pm Sun, February 7, 2010
By Nicholas Sohr
Daily Record Business Writer

ANNAPOLIS — Businesses should not expect to see $83 million in unemployment insurance tax reductions this year, a leader in the Maryland Senate said Friday, only hours after business and labor interests failed to reach a compromise on the legislation.

 The reductions are a key part of bills Gov. Martin O’Malley introduced to stabilize the Unemployment Insurance Trust Fund and provide relief to businesses.
 
 ”I don’t think the tax cuts will be a reality. That’s my gut feeling right now based on where we are,” said Sen. Thomas M. “Mac” Middleton, D-Charles, chairman of the Senate Finance Committee.
 
 The Department of Labor, Licensing and Regulation has already pushed back its normal deadline to send out tax notices to businesses and is now eyeing March 1 instead. Without a deal Friday, Middleton said finding a compromise in time to meet the March 1 deadline would be “almost impossible.”
 
 The governor’s proposal, filed as SB 107 and HB 91, would expand benefits available to Marylanders to make the state eligible for $126.8 million in federal funds. That one-time infusion would prop up the shrinking Unemployment Insurance Trust Fund and cover the $83 million in breaks for businesses this year.
 
 But businesses have lined up against the proposal, arguing that it would weaken the trust fund in the long term.
 
 ”What we’re up against is mistrust, a negative feeling toward federal bailouts right now, especially in the business community,” Middleton said.
 
 Business groups gave mixed responses to Middleton’s assessment, making evident the schism that arose in the business community over the proposed tax breaks.
 
 Some groups opposed the tax break outright, calling it instead a “tax deferral” that would keep businesses paying higher rates for longer.
 
 ”Our position was a little different from other business organizations,” said Tom Saquella, president of the Maryland Retailers Association. “We felt if the bill was passed and we got the $127 million, it should stay in the trust fund. We were never in support of the tax deferral.”
 
 Allyson Black, a Maryland Chamber of Commerce lobbyist, said the tax breaks wouldn’t have been a deal breaker, but added, “I don’t think we would ever support that.”
 
 Members of the National Federation of Independent Business in the state were in favor of the tax break.
 
 ”The one difference is that rate relief is something we were not opposed to. It would have had some impact for small business owners,” said Ellen Valentino, state director of the NFIB.
 
 Unemployment insurances tax rates for businesses are set each Sept. 30. With $301 million in the trust fund last Sept. 30, taxes jumped at least 300 percent for every business in the state. The minimum rate in 2010 is $187 per employee, compared to $51 last year. The 2010 rates top out at $1,147.50 per employee.
 
 The administration’s proposal would lower the minimum rate to $153, and the high end to $1,096.50.
 
 Middleton said DLLR is analyzing different options to offset the benefit expansions included in the governor’s plan. The administration and Middleton are still searching for a way to come away with the stimulus funds, which DLLR officials say are needed to save the state from borrowing more to keep the fund afloat.
 
 The department estimates it will need to borrow up to $300 million from the federal government this spring.
 
 ”We have been looking at ways to offset the additional benefits that would enable to get the $126 million,” Middleton said. “We’re not looking to eliminate anything, yet. We have been looking at reducing some things.”
 
 Business groups say resolution appears a long way off, and some suggest this issue could return during next year’s legislative session.
 
 ”I’m not optimistic,” Saquella said. “We’re still talking. We’ll see what comes up, but we’re running out of time.”
 
 Middleton, however, said he wants to find a compromise this year.
 
 “I can’t see how the perception of a federal stimulus is going to change between this year and next year,” he said.