Tax Breaks For Businesses Led To State Unemployment Funds Going Broke

By Laura Clawson

Over the past four years, a whopping 36 states have had to borrow from the federal government to pay unemployment insurance benefits. Obviously a recession with high unemployment has a lot to do with that, but not as much as you might think. Tax breaks for businesses (PDF) are once again a hidden culprit for state budget problems.

A new report from the National Employment Law Project shows that, recession or not, many states could have avoided borrowing for unemployment payments if they hadn't spent a decade weakening their unemployment insurance trust funds by slashing employer contributions:

Between 1995 and 2005, 31 states reduced employer contribution rates by at least one‐fifth (Henchman 2011, 16), causing the nation’s average employer contribution rate over the decade leading up to the Great Recession to fall to its lowest point in the program’s 75‐year history.

As a result, going into the recession, state unemployment insurance funds were short of recommended minimum solvency standards by a combined $38 billion, and 30 of the 34 states not meeting that minimum standard ended up borrowing, combined with just six of 19 states that started the recession with adequate funds. Adequate unemployment insurance reserves could have reduced borrowing to 13 states borrowing $9 billion rather than what ended up happening, with 31 states borrowing $42 billion.

But while the funding shortfalls came from employers contributing less than at any point in the previous 75 years, it's been jobless people who've gotten the blame and felt the pinch, with "At least ten states [passing] legislation to reduce the number of weeks of benefits available, severely restrict eligibility, or impose measures designed to discourage people from filing UI claims." Taxpayers, too, are paying, since states have already paid $3 billion in interest and penalties on what they've borrowed for unemployment, with more to come.

Businesses paid less when the economy was decent (not even good for many of the years of contribution cuts). Then the bad economy hit unemployed people first when they lost their jobs, second when their benefits were cut despite ongoing high unemployment. Again and again we're told that a bad economy is not the time to raise taxes on businesses or the wealthy—apparently it's never the moment for that, always the moment to cut another hole in the safety net.

Originally posted to Daily Kos Labor on Fri Aug 03, 2012

Technorati Tags: The Economy,Tax Cuts,Unemployment Insurance,State Deficits,Current Events

The Company He'd Like To Keep: Mitt Romney's Income and Tax Rates In Presidential Context

  An interesting chart from Laura Clawson at Daily Kos Labor

This scatter plot gives valuable context to Mitt Romney's high income and low tax rates: The addition of Romney to a scatter plot of the income levels of the last five presidents (during their years in office) requires the graph to be more than twice as tall as it otherwise would have needed to be.

The office of president pays an income most of us would love to have for even four or eight years, the George Bushes H.W. and W. come from old money, and Barack Obama has substantial book sales income, but compared with Mitt Romney's investment income, all of them, with the exception of Obama in 2007 and 2009, are just sort of creeping along at the bottom of the plot looking pathetic. Romney's low year was nearly four times Obama's high year. The median American income wouldn't really even show up on this graph—it would just look like the bottom had a black border.

Then there's taxes. Romney's higher tax rate is still lower than anyone else's lowest rate. Because it's investment income. The presidents had to work for at least a decent chunk of their income, so they paid more. And it's pretty safe to assume that these years represent the high-water mark of Mitt Romney's effective tax rate. Otherwise, he would have disclosed past years of tax returns.

For most of us, Mitt Romney's wealth is like that science project you did in grade school, the model of the solar system that there was absolutely no way to render to scale, because the sun is so much bigger than the planets and the distances are so great that even to make the faintest stab at rendering it to scale wouldn't fit in your classroom. Rich people can have great policy positions, of course, but even when he tries to fake it, Romney can't convincingly pretend that he sees the concerns and the fates of people down there at that invisible-on-this-graph median income as any closer to him than the sun is to Pluto in size or distance.

Technorati Tags: Mitt Romney,Income Taxes,Barack Obama,George Bush,Ronald Reagan,2012 Elections,Current Events