Jobless tax proposal supported Businesses back plan to boost levies for unemployment fund.

January 31, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- Man bit dog yesterday: Business called for higher taxes.

At a hearing before a House committee, representatives of thousands of Maryland businesses endorsed a Schaefer administration plan to raise immediately $61 million in unemployment insurance taxes.

But despite a strong show of support from the state chamber of commerce and other groups, there was dissension. Bethlehem Steel Corp. warned that the proposed changes would be "catastrophic to the economy," particularly a plan to raise the amount of payroll on which unemployment insurance taxes are levied.

"Please look at the ramifications it's going to have on an already depressed economy," said Edward R. Snowden, a spokesman for Bethlehem Steel.

The higher taxes are needed, the state says, because the recession has sapped the trust fund from which jobless benefits are paid. The fund, which is fully financed by taxes on companies, has dropped to about $172 million from the $450 million the state considers necessary.

If the fund is depleted, Maryland will have to borrow from the federal government. That would cost businesses even more as the interest payments came due.

To answer that immediate need, a special 2.2 percent surtax was imposed on all employers beginning Oct. 1. Because the unemployment insurance tax is charged on the first $7,000 each employee earns during the year, most businesses paid their 1991 unemployment insurance taxes well before October and won't experience the 2.2 percent surtax until the end of the first quarter of this year.

To avoid such severe recession-induced increases, business groups supported a plan yesterday to make broad changes in the entire system. The changes would raise additional funds a little at a time when needed, rather than levy a major surtax all at once.

Under the plan, heard before the House Economic Matters Committee, taxes would be paid on the first $8,500 earned by an employee, up from the current $7,000.

It would increase the highest tax rate, now 6.5 percent, to 7 percent next year and to 7.5 percent by 1998. And it would raise taxes 0.2 percentage points for everyone except those paying ++ the highest rate.

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