2012 SUTA Battle

· by Herb Dew

Herb is the CEO of HTI. He founded HTI in 1999 along with John Knight and David Sewell, and remains heavily involved in the organization today.
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If you have read some of my other blogs on this issue, you know that this last year SC’s SUTA tax structure was modified by the legislature and the impact was that tax rates went up on most companies between 60-350%. Some even higher than that! The senate passed a temporary relief bill that applied about $146 million in relief for the year 2011 that was retroactive back to January. This relief provided about 23% reductions. This left STILL the highest business tax increase that I ever recall SC enacting.

What does this do for SC? First, it weakens our claims of being a “business tax friendly” state. Any company that has labor as a major portion of their cost structure is going to look at our top tax rate of 11.5% and say “hey Ill go to Georgia…or Alabama…or Tennessee and not have that kind of risk”. More importantly, it was a significant tax increase placed on employers during a weak recovery out of the worst recession we have had in the US since the Great Depression. In our greatest time of need, when companies that had survived began the process of thinking about adding new jobs, the Senate passes a bill that levies on businesses a cost that in many cases cost the state thousands of jobs.

How did we get to this point?

First, there are many factors that caused SC to have to borrow money to cover unemployment costs triggered by the deep unemployment that struck the state starting the end of 2008.

1. The existing system didn’t not change enough to adjust for increased claims. All parties agree that there needs to be more tax income. The problem is that the state was slow in addressing the issue and now wants to get it all back too quickly. And at a HORRIBLE time for the economy.

2. SCDEW (South Carolinas unemployent commission) has been run poorly and has paid millions of dollars in fraudulent or unearned claims in the past. Again, this number is HUGE and now employers are asked to pay of the states sins.

3. Unemployment cannot be a welfare system. Right now it is. All parties agree that there is a system needed to assist someone while their transitioning to a new role. The problem is that we have people that just want to stay on that system.

These are just the biggest 3 reasons. Several other factors contribute to the problem. Over the coming months the issue will begin to come to the forefront as companies find out that this years reduction was only a bandaid. in 2012 the wage cap increases from $10,000 to $12,000 so there is a 20% increase on top of going back to last years “array” system rates.

How do we fix this? I think SC has to think out of the box.

The question that I keep wondering is “why do some companies in the lower tiers pay little or nothing? This is IN FACT an insurance policy. And we do have alot of companies that go out of business that cannot pay back over time their account deficits. Is it right to not pay anything towards an insurance policy? I have car insurance. I have not had a wreck or a claim on my car insurance EVER. Yet I still pay towards car insurance. I say make EVERY company pay SOMETHING. Its only fair. And it takes some pressure off companies in higher tiers that have a higher claims history because of the nature of their business.

Consider employee contributions. I heard a speaker say that an employee paying $1 a week would contribute up to $75 million a year towards their insurance. And maybe employees buy-in would help reduce the fraud that plague the system because they shared in that cost.

Drug test recipients. We had an employee that failed an employment drug test that was recieving unemployment. This is more frequent than people might think. Why pay for unemployable people?

Consider a work for pay system. Maybe let people get their first 4-6 weeks of unemployment without having to work. Than have them do public work or service work for a continuation of benefits. Its a motivation to find something if you have to work anyway. And it accomplishes something positive for the state while paying the money out.

These are just some ideas I have had. Stay tuned. This will be a big issue again this year (2012). We all want SC to be considered competitive. Right now our system hurts some idustries we need to come back desperately: Tourism, Farm, Manufacturing.


Herb Dew