Employer Taxes Climbing to Pay Back PA’s Unemployment Debt

Unemployment taxes for Pennsylvania employers will continue to climb for years to come, according to testimony earlier this week from acting Secretary of Labor and Industry Patrick Beaty. 

But state business associations do not see the hike as a violation of Gov. Tom Corbett’s campaign promise not to raise taxes or fees. 

“This is not on Governor Corbett. He inherited this problem. We need to fix our unemployment system,” said Kevin Shivers, state director of the Pennsylvania chapter of the National Federation of Independent Business, known as NFIB. 

The state, under former Gov. Ed Rendell, borrowed $3 billion from the federal government to remain solvent during the continuing recession, and now it’s time to pay the money back. 

Beaty told the Senate Appropriations Committee March 28 that the borrowing will continue, but the interest and principal payments on the money borrowed must begin now. Those added payments began in January and will grow and continue until at least 2018, Beaty said. 

Employers began paying an added $35.20 per employee for interest repayment in January, as well as $21 per employee for added principal payments. That combined $56.20 per worker could rise to $190 each by 2018, Beaty said. 

The state’s unemployment rate is 8 percent, down from a high of 8.9 percent. Lower unemployment translates to lower costs to the state and businesses. 

Still business leaders and trade associations are upset by the state’s laws. 

“We knew this (tax hike) was coming,” said Gene Barr, vice president of the Pennsylvania Chamber of Business and Industry. “The (unemployment compensation) system has to be reformed. We’re talking about reforms like making people look for a job when they are out of work and drawing benefits.” 

David Taylor, executive director of the Pennsylvania Manufacturers’ Association, echoed Barr’s complaints. 

“The (unemployment compensation) system is a mess, and these new tax increases are a big problem," Taylor said. “It is not a violation of Governor Corbett’s pledge. It is a solvency problem. We have to bring state spending under control.” 

Shivers said, “First we have to fix the system and then pay back the money we owe. We have to do things like assure people are available for work in Pennsylvania, offset payments based on severance agreements and revamp the appeals system.” 

Organized labor has continually stood against those changes, Shivers said, and thwarted any legislative agreement on reforms. 

Pennsylvania’s unemployment compensation taxes are based on the first $8,000 earned annually by a worker. That has been the amount since 1988, though President Barack Obama has proposed raising the federal base from $8,000 to $15,000 in 2014. That would mean additional taxes for state employers. 

Rick Bloomingdale, president of the Pennsylvania AFL-CIO, said the taxable wage base should have kept pace with inflation. The AFL-CIO is a federation of labor organizations.

"Had that kept pace, we wouldn't have had to borrow from the feds and there would have been money to fund the system," Bloomingdale said.

He said the taxable wage base would be about $18,000 today if adjusted for inflation since 1988.