Tax hikes and benefit cuts likely as La. runs out of unemployment money
BATON ROUGE, La. (WAFB) – Louisiana is running out of money it saved to pay unemployment benefits. Without congressional action, the state will have to raise corporate taxes and cut weekly unemployment benefits.
Gov. John Bel Edwards said the coronavirus has reduced the state’s Unemployment Savings Account by about $1.1 billion to $143 million. When the account balance falls below $100 million, the state must take out a loan from the U.S. Treasury Department to guarantee the maintenance of unemployment benefits.
“I don’t want to mislead people by saying ‘if’ the trust fund drops below $100 million,” Governor Edwards said Monday, September 14. “It’s going to drop below $100 million.”
If Louisiana is forced to take out a loan, state law imposes a surtax on employers of up to 30% on taxable payroll. The amount of a company’s taxable wages would increase from $7,000 to $8,500, and the maximum weekly unemployment benefit an unemployed person can receive would decrease by $26.
The potential reduction in payments comes as the federal government runs out of money it had used to wire $300 into state unemployment benefits.
“I’m probably going to have to sell my house, move and downsize,” said Jan McNeal, an unemployed administrative assistant. “That’s pretty much the main thing here.”
Most unemployed Louisianans received the penultimate enhanced unemployment benefit on Monday, September 14. It’s unclear when the government will drop the final $300 payment for the week ending September 5.
“I don’t want to move, but maybe I don’t have a choice,” McNeal said. “I am very worried and upset about our future.”
Governor Edwards has repeatedly asked Congress to subsidize state payments by making federal unemployment loans exempt or by depositing money directly into state coffers.
“That’s another reason Congress needs to get back to work and sit down and figure out this next stimulus package,” he said. “I think the House of Representatives passed a $600 bill. The Senate introduced a $300 bill. Somewhere in there there has to be a compromise, you think.
To avoid the doomsday scenario where taxes go up and benefits go down, congressional lawmakers should reach an agreement before the Louisiana revenue estimate conference convenes later in September.
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