To the editor,
I am getting in touch about an article that appeared in the Mid-Hudson News two days ago, “State’s unpaid unemployment debt could cost employers”. I am a professor at Cornell’s School of Industrial and Labor Relations, and I work on unemployment insurance.
You wrote, “Members of the Business Council are calling for action because of the 30 states that borrowed money from the federal government to fund their UI programs, only New York has yet to paid their debt” (sic.) This is not true. California has $17.7 billion in trust fund debt, compared to our $6.7 billion debt.
The Business Council’s Heather Mulligan is right to point out that the finances of the state’s UI system are in bad shape, and that this is a big problem for small businesses. The last year New York’s UI system was considered solvent according to the Federal government’s main metric was 1974. Given interest payments and federal penalties that drive up UI taxes, the state needs act sooner rather than later.
What I miss from the article is some clear plan that would benefit small businesses. One serious problem is the regressive tax structure that currently funds UI. Right now, employers pay state UI tax only on the first $12,300 of each worker’s pay. This is a low taxable wage base; for Social Security it is $160,000. One consequence of having such a low taxable wage base is that small businesses pay a higher percentage of overall payroll in UI tax than big businesses do, since small businesses tend to pay lower wages. A sufficiently rapid increase in the taxable wage base would make it possible to pay down the state’s UI debt, while funding tax cuts for small business and benefit increases for workers.
It’s time for New York State to tackle the longstanding structural problems of UI financing. This means progressive UI taxation that shifts the burden from small business to big business.
Sincerely,
Ian Greer
Research Professor and Director of the Ithaca Co-Lab
Cornell University School of Industrial and Labor Relations
