Task force proposes higher taxes, benefit cuts | News | Kentucky Roofing Contractors Association

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Task force proposes higher taxes, benefit cuts

A Kentucky task force consisting of lawmakers, employers' representatives and labor leaders has recommended higher payroll taxes for employers and lower unemployment benefits for workers starting in 2012 to help fill the state's unemployment trust fund, according to The Courier-Journal. Any changes would have to be adopted by the Kentucky General Assembly.

Since January, Kentucky has borrowed $537 million from the federal government to pay unemployment benefits; it is expected the state will continue to borrow until the employment situation improves.

Payroll taxes will rise for Kentucky employers in 2011 to begin repaying the debt with interest. The proposed changes are expected to raise about $1 billion through 2022 and are meant to return the system to solvency to prevent further borrowing.

For about 10 years, Kentucky has been paying out more in benefits than it takes in from employers, with the deficit being covered by the fund's reserve. The system went broke after the significant increase in unemployment during the recession, and Task Force Chairman Helen Mountjoy says the only solution is to raise taxes and cut benefits.

David Adkisson, president of the Kentucky Chamber of Commerce, says although employers will be paying more into the system, the proposed changes would save employers millions in the long term because it would avoid more borrowing from the federal government.

Currently, Kentucky businesses pay taxes on the first $8,000 of an employee's income; that would increase to $9,000 in 2012 and eventually reach $12,000.

Employees' maximum unemployment benefits currently are equal to 68 percent of their previous wages; that would drop to 62 percent and workers would have to wait one week before claiming unemployment.

12/17/2009