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Some businesses could see tax hikes if state unemployment fund is not replenished

Some businesses could see tax hikes if state Unemployment fund is not replenished
Published: Jan. 25, 2022 at 5:57 PM CST

BATON ROUGE, La. (WAFB) - After taking on a pandemic and four major disasters over the last two years, the meter gauge on Louisiana’s unemployment trust fund is approaching empty.

Before the pandemic turned everything on its head in March of 2020, Louisiana’s Unemployment Trust Fund was at an all-time high — $1 billion. But, that all changed when thousands of Louisianans were out of work within weeks. On top of that, businesses that pay into the fund were no longer making money either.

Over the last two years, Louisiana has paid over 700,000 people more than $11 billion in benefits, leaving the fund around $200 million currently. But, state law states the fund must be maintained at $750 million, or else businesses that pay into the fund will see a tax increase until it is replenished.

“I don’t think there should be a tax increase of that type especially since we’ve been given funds by Congress specifically for COVID-related expenditures,” said Gov. John Bel Edwards (D).

As part of his 2022 budget proposal, Edwards wants the state to invest $550 million into the fund to avoid those tax hikes.

Louisiana Workforce Commission Secretary Ava Cates said this is a win-win for business owners and employees.

“It will prevent a tax increase. It will help us to lure new businesses to Louisiana by keeping a favorable business climate, and it’s a safety net for workers when they may lose their job through no fault of their own,” said Cates.

Some lawmakers have expressed concern that the move could discourage people from returning to the workforce, but Cates said that’s not accurate.

“Absolutely not, maintaining a healthy trust fund balance is good for the state, it’s good for businesses. I think some individuals are of the mindset that the fund will rebuild itself if we do certain things but that will take years,” explained Cates.

If the legislature does not agree to the governor’s proposal, other ways to rebuild the fund could include reducing unemployment benefits or borrowing more money from the feds. Lawmakers on both sides, however, agree Louisiana can’t afford to kick the can down the road.

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