Senate Moves To Freeze Unemployment Tax For Third Year Running

By Sarah Birnbaum

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Feb. 11, 2011

BOSTON — The Massachusetts Senate wants to freeze the state's unemployment insurance rate — the tax paid by employers to cover the cost of jobless benefits.

Because the unemployment rate has remained relatively high, Massachusetts' unemployment trust fund has been teetering on the border of solvency.  To keep the jobless checks coming, an automatic trigger is supposed to kick in which would increase the taxes paid by business owners by $230 more per employee per year.

But the Senate voted unanimously Thursday to keep the state's unemployment insurance rate where it is, arguing that the freeze is necessary to ease the burden on small businesses.  

Senate Ways and Means Chair Stephen Brewer of Barre advocated for the tax freeze on the Senate floor.
 
“Given the fragile condition of the state’s economic recovery, sharply increasing costs on businesses could be devastating," Barre said. "By freezing the schedule, we will give Bay State employers some breathing room to help them get through the year.”
 
If the House and the governor agree to the tax freeze, and the jobless picture fails to improve, the state might have to take out a loan from the federal government to cover the benefits.  And that’s money that will eventually need to be paid back by business owners through higher federal unemployment taxes.
 
But Brewer says the tax freeze is worth it. The federal loans are-interest free until next September.  And there’s pressure in Washington to defer interest payments for another two years, although Republicans may oppose that plan. Brewer says the numbers just make sense:
 
"The measure is financially sound. Last year when the state similarly froze the schedule, the federal trust fund was fully reimbursed before any interest penalties were triggered," Brewer said. 

The rate-freeze bill now goes to the House.

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