State to raise jobless insurance tax by $61 million System will start reflecting unemployment more quickly

April 04, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- The General Assembly has agreed to impose $61 million in additional unemployment insurance taxes on Maryland businesses this year in a "pay-me-now or pay-me-later" reform.

Identical House and Senate bills aimed at making the unemployment tax system more responsive to changing employment conditions moved toward the governor's office this week.

Yesterday, delegates approved the Senate version of the legislation, sponsored at the request of the state Department of Economic and Employment Development. The governor is expected to sign the legislation.

The $61 million will help shore up the unemployment insurance trust fund, which had dropped to $166.6 million by mid-February. State law considers $450 million an adequate level.

Maryland companies would have had to pay the money at some point anyway, because the tax system recoups from employers all the money paid out in unemployment benefits. When the fund gets as small as it has during the recession, surtaxes must be imposed on businesses.

But the current system reacts to high unemployment only gradually, so large surtaxes kick in well after unemployment benefits rise. Employers taxed at the lowest rate will see an unemployment insurance tax bill 23 times higher this spring because of the latest surtax.

Changes in the legislation will cause the surtaxes to kick in more quickly, but at lower levels.

"It makes some adjustments to the system [over the next six years] that will allow the fund to be more stable and have less peaks and valleys," said Del. George H. Littrell Jr., the Frederick County Democrat was on a panel that developed the bill.

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