ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, January 22, 1997 TAG: 9701220067
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: MIKE HUDSON STAFF WRITER
Gov. George Allen's plan to cut unemployment taxes could give businesses a break of nearly $200 million over the next six years, an aide said Tuesday.
By 1999, Allen's top economic aide said, the plan would cut the average unemployment tax paid by businesses by nearly one-third. That would reduce the tax from a projected $68 per worker under the current rate to about $46 per worker under Allen's proposal.
The hard numbers in the tax-cut proposal - which is a centerpiece of Allen's 1996 legislative agenda - were revealed Tuesday. Secretary of Commerce and Trade Robert Skunda said the proposal would "really benefit businesses - and small businesses especially. This plan keeps Virginia as competitive as we could possibly be."
But the state's top labor leader, AFL-CIO President Danny LeBlanc, said Allen's proposal is unfair to Virginia's working people because it does nothing to fix an unemployment compensation system that he calls the stingiest in the nation. Less than 18 percent of unemployed workers in Virginia receive jobless benefits, the lowest percentage in the United States in 1995.
If businesses want a tax break from Allen, LeBlanc said, "he ought to give it to them. But give workers a piece of the action, too."
The AFL-CIO is backing bills that would increase benefits and expand the number of out-of-work residents who qualify for unemployment aid. The state could give a smaller tax cut to businesses and increase protections for workers at the same time, LeBlanc said.
But Skunda said that's a bad idea. Any increase in benefit payouts would "erase the savings" Allen wants to pass on to businesses, Skunda said.
Last year, the state raised the maximum jobless benefit from $208 a week to $224, Skunda said, and Allen has no plan for more increases.
The tax-cut proposal was introduced at Allen's request by state Sen. Jack Reasor, D-Bluefield. Skunda said Allen's plan would benefit Virginia's workers by giving businesses more money to invest - thus boosting wages and creating more jobs.
For a business with 50 employees, Skunda said, the plan might mean tax savings of $1,000 a year. That's a lot of money for a small business, he said.
The state has almost $900 million in its unemployment benefits fund. Skunda said the Allen proposal would shrink the fund to about $700 million by offering an estimated $180 million to $190 million in savings to businesses over six years.
That, Skunda said, would leave enough in reserve to pay out benefits for more than 15 months, even during a recession.
LeBlanc said it wouldn't cost much to increase benefits for workers, and it would help Virginia catch up with the rest of the nation. The increases in benefits over the years have been modest and haven't kept up with inflation, he said.
The maximum benefit once replaced 56 percent of the state's average wage, LeBlanc said, but now it barely replaces 42 percent. At the same time, he said, Virginia uses complex rules to keep the lid on the number of unemployed people who qualify for help.
Because of that, he said, Virginia businesses already enjoy one of the lowest jobless-tax rates in the nation.
LENGTH: Medium: 66 lines ILLUSTRATION: GRAPHIC: Chart by staff: Gov. Allen's business tax cutby CNBproposals. color. KEYWORDS: GENERAL ASSEMBLY 1997 MGR