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March 18, 2021

Business groups attack plan to shift unemployment trust fund burden to larger employers 

Photo | HBJ File The Connecticut State Capitol.

A proposal to make large employers pay more to rebuild the state’s unemployment trust fund has drawn criticism from business groups. 

Jonny Dach, policy director for Gov. Ned Lamont, outlined the new plan in testimony filed before a public hearing Wednesday on House Bill 6633, brought forward by the Finance, Revenue and Bonding Committee.

The plan would expand the taxable wage base cap used to calculate how much employers owe the unemployment trust fund, in effect shifting the burden to larger employers.

“Although allowing most wages to escape unemployment taxes might sound like a good deal, it actually threatens fund solvency, reduces the power of the experience rating system, and disproportionately burdens small businesses and working families,” Dach said.

The debate comes after Connecticut’s unemployment trust fund -- which is funded by employers to pay benefits to jobless residents -- went broke last year following large-scale layoffs related to the COVID-19 pandemic. 

That has forced state government to borrow money from the federal government in order to continue paying out unemployment benefits. That money must be repaid over time by employers, which will likely face higher taxes as a result.

Ahead of the hearing, testimony from business groups attacked the proposal as failing to address what they see as the main problem: An unemployment system too generous with benefits.

“While we firmly believe the reason for the fund’s insolvency is the failure on the part of the labor department and policymakers to support meaningful benefit reforms rather than always revert to tax increases, we have been open to reasonable compromise,” said Eric Gjede, vice president of government affairs at the Connecticut Business & Industry Association. “HB 6633 is not reasonable in our view.”

Raising the wage cap would give Connecticut the highest taxable wage base in the nation, Gjede said, while maintaining unsustainable levels of benefits.

“Small businesses are concerned that these adjustments, combined with a dramatic increase in the taxable wage base would result in higher costs,” read a statement in opposition to the bill from the National Federation of Independent Business (NFIB). 

“NFIB also strongly urges the legislature and the administration to seek other ways to help lift the inevitable unemployment-related cost burdens on small businesses, such as a direct appropriation to help shore up the state’s unemployment fund and/or pay back the interest on borrowing to the federal government,” the statement continued.

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