Maine’s unemployment insurance taxes going up next year

Posted Nov. 29, 2011, at 5:24 p.m.
Last modified Nov. 30, 2011, at 5:36 a.m.
 Lt. General Robert J. Winglass (Ret.).
Courtesy of Governor's Office
Lt. General Robert J. Winglass (Ret.).

AUGUSTA, Maine — Many Maine employers will see a slight increase in the taxes they pay to fund the state’s unemployment system come January. But even a small increase has employers upset, although not surprised.

“We are looking at a very small increase, 2.3 percent.” said Labor Commissioner Robert Winglass. “Now that is on average with experience rating affecting an individual employer’s tax rate.”

The amount of the increase ranges from $2.40 per year per worker to $18 per worker for the year. Employers pay the tax on the first $12,000 in wages they pay for each worker. The unemployment system in Maine is entirely funded by employers.

“And there are some employers that could see a decrease in their tax rate because of a change in their experience rating,” said Laura Boyette, Director of the Bureau of Unemployment. She said Maine has a complex rating system for employers based on a number of factors. One is on how much an employer has used the unemployment fund, the experience rating.

“Where they end up in the rate schedule can also shift from one year to another,” she said. The new rates take effect January 1, 2012, and Boyette said employers will receive notice of changes affecting them.

But even a small increase in taxes will have a negative impact on some employers, said Peter Gore, vice president of the Maine State Chamber of Commerce. He said while the increase will have a small dollar impact on most employers, coming out of the recession any impact can hurt.

“This is money they can’t use for other things,” he said, “like paying for increased health insurance costs or increased energy costs or even adding another employee.”

David Clough, Maine Director for the National Federation of Independent Businesses, said the small businesses he represents expected some sort of increase in the UI tax and are thankful it was a small increase.

“This is like a pinch to the arm and not a punch to the shoulder,” he said. “There are a lot of other states where employers are getting hit really hard.”

Maine is one of a handful of states that did not have to borrow from the federal government to make payments to laid-off workers. Twenty-nine states have not only raised taxes on employers, they have imposed surtaxes to pay back those loans.

“We were there once, in the late 1980s and early 1990s,” Clough said, “it was a real mess. It hurt everybody.”

Gore said that situation led employer groups and union representatives to negotiate a compromise that led to higher tax rates, with some benefit reductions, during the Gov. Angus King administration. That is still in effect today and is credited with Maine’s healthy trust fund balance that has weathered the recession.

Gore said keeping the fund healthy requires stronger policing of fraud and abuse of the system. He said employers are grumbling that they have had individuals receiving unemployment benefits refuse to take a job because the benefits were better than the job being offered.

“There have been bona fide job offers made to recipients of unemployment insurance and those job offers have been refused because the person has indicated they think they could do better staying on unemployment insurance,” he said. “Based on what I am hearing, this will be an issue before the Legislature when they are in session in January.”

Clough said the issue has been discussed during the private sessions between employers and Gov. Paul LePage at his most recent job creation meetings. He is not aware of any study establishing how big a problem it is, but he said it needs to be addressed.

“I have heard it from employers,” he said. “You have some that are getting unemployment and looking for the ideal job and not a job that will give them a paycheck.”

Gore said he believes the Labor Department is trying to address the problem and faulted those employers that have not reported the problem to the agency for an investigation.

Winglass said he takes the issue of all fraud in the system “very seriously” and is beefing up enforcement efforts. He said he looks at the health of the unemployment trust fund every day and realizes fraud and errors erode the health of the fund.

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