Robin Hood in reverse for unemployed workers

by Chris Fitzsimon

By the time you read this, it’s almost certain that a plan to punish unemployed workers for unwise tax cuts state lawmakers gave to businesses will have cleared another hurdle and will be on the way to the General Assembly for final approval.

That’s what the scheme to repay the $2.4 billion the state borrowed from the federal government to pay unemployment claims during the Great Recession does in a nutshell, forces unemployed workers to bear the brunt of repaying the debt that was largely created by a series of unwise cuts to unemployment taxes on corporations in the last twenty years.

The N.C. Budget and Tax Center reports that if businesses in the state had merely paid unemployment taxes at the national average for the last 20 years, the state would have $2.8 billion in the unemployment trust fund today and wouldn’t owe the federal government a dime.

The tax cuts don’t come up much in the public discussion of the plan to repay the debt that was created in secret by the N.C Chamber and a handful of legislative leaders. It was presented to the Revenue Laws Study Committee last month and given tentative approval after very little debate. Final approval was expected Tuesday at the committee’s final meeting before the new General Assembly convenes.

Chamber lobbyists and the committee chairs describe the plan as one that calls for shared sacrifice from businesses and workers. And while it’s true that some businesses will play slightly higher taxes for a few years, those tax increases are temporary. Many businesses will pay lower unemployment taxes under the plan.

Laid off workers, meanwhile, will receive lower weekly unemployment benefits and the duration of the benefits will be reduced—and those cuts are permanent.

George Wentworth with the National Employment Law Project says the changes would take North Carolina’s unemployment compensation program from one that’s roughly average compared to other states to a program that would be near the bottom in how workers are treated.

Wentworth told an N.C. Policy Watch Crucial Conversation luncheon Monday that the proposal would undermine the two primary goals of the unemployment system, to provide partial income replacement for jobless workers and to stabilize state and local economies.

Wentworth pointed out that the North Carolina businesses paid the lowest tax rate in the country from 1993-2002 leaving the state with just $10 million after the 2001-2002 recession. That should have been a clue that the system was headed for trouble.

Proponents of the Chamber’s plan point out that North Carolina’s maximum benefit for unemployed workers in the highest in the Southeast, but they rarely mention that the state’s average monthly benefit, a far more illustrative number, is slightly below the national average.

The plan that emerged from the backroom dealing would slash the maximum weekly benefit by a startling one-third, dropping North Carolina’s to 40th in the nation in how much unemployed workers can receive and the already low average benefit would be reduced further, taking more than $100 million out of the state’s economy.

Wentworth reports that no state has ever cut the maximum benefits so severely.

There are plenty of other regressive changes in the plan from eligibility changes to waiting periods. The bottom line is that the plan working its way from the secret meetings through the legislative halls would reduce benefits to unemployed workers in North Carolina by as much as $700 million a year for the next four years while reducing taxes on employers by hundreds of millions of dollars.

That’s not shared sacrifice. That’s Robin Hood in reverse, the well-connected corporate interests using the lingering effects of Great Recession as an excuse to overhaul the unemployment system they never liked much in the first place, a program that was designed to help both families and the state’s economy weather a crisis.

There’s still time for lawmakers to come to their senses and slow down this regressive train, but don’t count on it.

The new Tea Party class of lawmakers will be sworn in this week and some of them, like Rep. Michael Speciale from New Bern, have said the unemployment system should have never been created in the first place. The families of workers laid off through no fault of their own are apparently just supposed to suffer.

Speciale may not get his way completely, but he can take solace in the plan created by the Chamber.

Unemployed workers and their families will suffer plenty if the proposal to rip gaping holes in the most basic safety net program is enacted. North Carolina ought to be better than that.

Chris Fitzsimon is Executive Director of NC Policy Watch and and NC Spin Panelist