Businesses challenge tax

A new state law assesses Missouri employers an estimated $91.95 per employee beginning in 2005. That assessment, coupled with other new provisions to Missouri’s unemployment insurance law, is projected to cost Penny’s Penmac job placement agency an additional $500,000 in taxes next year, according to a Division of Employment Security report calculated specifically for Penmac.

Penny said the nature of her business makes the tax increase a heavier burden. Penmac is always hiring.

“We only have one product and it’s labor,” Penny said.

The state assessed Penmac with having 3,600-full-time-equivalent employees in Missouri.

“We know the impact,” Penny added. “There’s going to be a lot of folks very shocked when they receive their tax bills in January.”

A legislative forum held Aug. 11 in Springfield was designed to soften the blow to area manufacturers.

Southwest Area Manufacturing Association organized the forum to help its members understand the new law’s impact on their businesses, said SAMA Executive Director Rita Needham.

“This is a significant additional cost to manufacturers. We are concerned about that,” Needham said.

The forum featured legislators and lobbyists both for and against the new law. At its core was continued debate as both sides hashed out details in front of 30 SAMA members.

Though the new law aims to save employers money by changing certain unemployment benefit amounts and qualifications, opponents say higher taxes outweigh those reforms.

“The problem with it is that it increased taxes,” said Rep. Brad Roark, R-Springfield, a bill cosponsor who turned his back on it during the session.

Under House Bill 1268, which Gov. Bob Holden signed July 1, Missouri employers will be taxed 50 percent more on average next year, largely due to the estimated $91.95 per employee assessment. The assessments would repay money the state plans to borrow – the law authorizes borrowing up to $450 million at about 2.5 percent interest – to float the insolvent fund and pay down federal debt that carries 6 percent interest.

The unemployment insurance trust fund went bankrupt in March 2003, forcing the state to borrow more than $300 million from the federal government.

Roark was among SAMA’s panelists, along with bill sponsor Rep. Todd Smith, R-Sedalia; Jim Kistler, Associated Industries of Missouri vice president; and Kelly Gillespie, Missouri Chamber of Commerce and Industry vice president of governmental affairs.

Though the panelists sat together on stage at Oasis Convention Center, the division was clear: Smith and Gillespie favor the new law, while Kistler and Roark say it is flawed.

“I don’t think that employers are responsible for the fund going bankrupt,” Roark said.

Gillespie is fighting that stigma; the bill is more than a tax increase, he said.

“There are groups still throwing hand grenades at this thing,” said Gillespie, who helped write the new law and is meeting face-to-face with business owners across the state.

“This is not just a tax bill,” he said, adding that it cancels Federal Unemployment Tax Act penalties employers would have faced and that new provisions should save the system more than $50 million in 2005. “Please look at this bill in its entirety.”

Proponents say the new law makes strides in the areas of benefits fraud, absenteeism, and drug and alcohol abuse. And they say it is only the first step to building a solvent fund.

“I think there is no question that this is a flawed bill,” said Sen. Norma Champion, R-Springfield, who was in the SAMA audience and voted for the bill. “We felt we needed to do something. This is a tug of war. We will be working on it.”

Some of the manufacturers walked away from the forum with a sense of hope.

“We are making some measurable progress,” said Jim Conley, owner of Foster Manufacturing in Springfield, which produces quick-disconnect couplers.

Others were just glad to see reform after Holden vetoed a similar bill last year.

“This issue needed to be addressed,” said Dan Conner, owner of IMEC in Monett, who drove to Springfield for SAMA’s meeting.

However, Conner said he was disappointed to see two of Missouri’s largest employer groups – Missouri Chamber of Commerce and Associated Industries of Missouri – at odds over the issue.

Getting two groups that represent more than 4,000 Missouri businesses to agree on what Kistler calls the most contentious business issue in years is easier said than done.

“Reasonable minds can differ. That’s exactly what happened on this bill,” Kistler said. “We weren’t sure the savings were going to equal the costs.”

Beyond the costs, Penny calls for sweeping reforms before the unemployment system is fully repaired. As owner of a job placement agency for 16 years, Penny suggests the state require unemployment insurance recipients pass drug screens, register at the state-run GreatHires.org and volunteer at a nonprofit or church.

“You can’t keep throwing money at it” and not ask for anything in return, Penny said. “I’m sorry the fund is bankrupt. I say let’s look at why.”

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