by Brian Balfour
Senior Vice President of Research, John Locke Foundation
While the ongoing state budget negotiations mean we must continue to await the fate of proposed cuts to personal and corporate income tax rates, legislation that would allow job creators to avoid a tax hike appears poised for approval.
From Business NC:
North Carolina would avoid a scheduled unemployment tax increase next year under legislation that will soon head to Gov. Roy Cooper.
Under current law, the tax rate paid by most employers would increase automatically in 2022 to 2.4% because of the amount of money that’s in the unemployment insurance trust fund. There’s currently $2.9 billion in the fund. A last-minute provision added to Senate Bill 311 would stop that hike and keep the rate at 1.9% until the end of 2022.
At a time when there is a significant worker shortage, the last thing our state needs is to hike taxes on employers seeking to hire or maintain workers.
Meanwhile, the UI trust fund still carries a healthy balance, and one potential use of federal ARPA funds state legislators should consider is further replenishing the fund.
Recall that unemployment insurance tax reform was included as part of the historic 2013 tax reforms, changes that enabled the state to pay back early the funds borrowed from the federal government to cover spikes in unemployment benefits during the Great Recession. The move saved employers billions in taxes and was credited by academic research with improving North Carolina’s labor market compared to our regional neighbors.