Hey, you know that two billion dollars of federal funds we need to borrow to shore up the unemployment insurance trust fund? I’m sure you’ll be shocked to hear that Rick Perry’s appointees on the Texas Workforce Commission are thinking about delaying the inevitable tax hike to pay for all that until after the 2010 elections.
A plan to delay the worst of tax increases until 2012 is circulating at the Texas Workforce Commission, which is expected to set next year’s rates on Nov. 3.
Commissioners face an unappealing choice: Hammer businesses next year or spread the pain out over several years. Some experts say that while it’s understandable the commission would want to defer pain as long as possible, a blow that comes just as the recession wanes could crimp job creation in the state.
“It’s a big gamble in many ways,” said Don E. Baylor Jr., senior policy analyst at the Center for Public Policy Priorities, which advocates for low- and middle-income Texans. “We’re basically saying, ‘Hey, we’ll get out of this the same way we got out of it the last time, which was just gangbuster economic growth.’ And I don’t think anyone’s forecasting that.”
Bill Hammond, president of the Texas Association of Business, the state’s largest business organization, also expressed caution.
If commissioners try to postpone heavy tax increases for two or more years, “they might be overdoing it a little bit,” said Hammond, a former Dallas state representative who was the commission’s chairman under Gov. George W. Bush.
“Employers know that we’ve got to pay the piper” after a severe recession, he said.
When even Bill Hammond says that putting off a tax increase might not be such a hot idea, you know it’s a really risky idea.
No decision has been made, but commissioners could suspend for two years an assessment that makes up for shortfalls in the fund, which has been tapped out and living on federal loans since July.
They’d also issue $2 billion in bonds at the end of next year, to pay off the feds before any interest kicks in, triggering bond repayment taxes that could last until 2019.
Even with the extended delay of taxes, most employers would pay about 50 percent more next year than this year, according to a Dallas Morning News analysis of historical tax yields and recent commission documents. This year, nearly 75 percent of Texas businesses paid $23.40 per worker into the fund.
If the commissioners don’t issue the bonds and don’t suspend a “deficit assessment,” then employers probably would be squeezed harder next year than they have been in 21 years. The tax paid by most employers could go up fourfold, and maybe even more than that, the newspaper’s analysis indicates.
Earlier this year, Perry and lawmakers rejected $556 million in federal stimulus money that would have eased the state fund’s shortfall. Perry said the money would have come with too many strings attached, such as liberalized treatment of people quitting their job to follow a spouse to a new location or unemployed workers seeking only part-time work.
Last year, Perry pushed the three workforce commissioners, who are his appointees, to suspend collection of part of the tax, saving employers $90 million. He also trumpeted $148 million of refunds to employers, required by law when the fund balance passes $1.7 billion.
This year, just over $1 billion was collected from employers, while the state’s on track to pay out some $3.5 billion.
Just so we’re all clear on who we can thank for this.