SUTA Change, the Next Steps.

It starts first with a bad bill passed with good intent. A bill that is passed quickly under untested conditions, with no real understanding of the impact it might have. Perhaps the largest business taxes increase in SC state history. A bill that sharply increases a tax line that many Carolinians aren’t familiar with, State Unemployment Tax (SUTA).

Affected South Carolinians all over the state receive a bill, a tax bill that is retroactive back 30 days, that increases their individual SUTA tax in most cases by 60-500%. Unannounced. Unplanned for. Passed and in effect during a moderate recovery. What industries are hardest hit by this increase? Manufacturing. Farming. Tourism. Hospitality. Staffing. All industries hardest hit by the recession. All industries we need to bounce back.

Groups all around the state, but particularly here in the upstate, organized to compare notes and share with legislators what they knew to be the truth. Something was very wrong with this bill. Companies that had never laid off for 30 years but that were affected by this recession were all of a sudden “abusing” the system. They were “penalized” for having to lay off employees.

 

As companies reviewed their tax bill and researched their history they began uncovering a multitude of facts that were concerning. Why did one tier jump 91% and yet the other tiers were flatter? How come many companies had a one year increase that exceeded their total 7 year short fall? Who would cover the costs associated with the prior mismanagement of the former SC DEW? What about businesses that failed over the last 7 years? Who paid those costs? As answer after answer was forthcoming, the truth began to sink in. Tiers 13-20 would bear the majority of these costs. They were the “abusers” of the system. They were the ones that needed to be most “penalized”.

But the companies in Tiers 13-20 were made up of companies we all respected.  Big companies and small…companies that in most cases tried to keep employees and fought their way thru the toughest economy to SURVIVE 2008-09 and be in a position to grow back when we needed them to.

Now the full impact is understood there are modification scenarios in front of the senate under consideration. The Labor, Commerce and Industry Committee (LCI) is reviewing these and beginning to consider these. It’s no secret that there is resistance to increasing the first 12 tiers. The tax decreases given to small businesses that have had no history of layoffs was a “tag line” for selling the bill at the outset. Bad decision or not (why give a tax cut when you are giving tax increases of 500% to some companies) its “bad politics” to take back what you gave away already.

The LCI Committee needs to have hearings on the scenarios under consideration and allow the bill to go in front of the entire LCI Committee. This is too important to be lost in subcommittee. I think that they will do this. Their constituents have spoken out hard and a full vote is what’s mandated by this.

I support reducing tiers 13-20 by around 35-40% equally across all tiers. This can be done without hurting tiers 1-12. Tiers 13-20 will still face increases between 45-250%. But this is at least better than the increases they face in a few short weeks.

This is a financial problem that the government got us into. I trust that they will show good judgment and correct this mistake before it sends us backwards into decline again. The next few weeks are critical. Hopefully the LCI Committee and the Senate will take this up and provide some relief.