Tax hike and reduced benefits likely as La. runs out of money for unemployment

Federal $300 payments tacked on to state benefit will stop as well
Updated: Sep. 14, 2020 at 7:25 PM CDT
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BATON ROUGE, La. (WAFB) - Louisiana is running out of the money it has saved to make unemployment payments. Without congressional action, the state will have to raise taxes on businesses and reduce weekly unemployment payouts.

Governor John Bel Edwards says the coronavirus has whittled the state’s unemployment savings account from roughly $1.1 billion to $143 million. When the account balance drops beneath $100 million, the state must take out a loan from the U.S. Department of the Treasury to ensure unemployment payments continue.

“I don’t want to mislead people by saying ‘if’ the trust fund drops below $100 million," Gov. Edwards said Monday, Sept. 14. "It’s going to drop below $100 million.”

If Louisiana is forced to take out a loan, state law mandates a surtax of up to 30% on taxable payroll be imposed on employers. The amount of a company’s taxable wages would increase from $7,000 to $8,500, and the maximum weekly unemployment benefit a jobless person can receive would drop by $26.

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The potential reduction in payments comes as the federal government runs out of the money it had been using to tack $300 onto the state unemployment benefits.

“I’ll probably have to sell my home, move, and downsize," Jan McNeal, an unemployed administrative assistant, said. "That’s pretty much the bottom line here.”

Most jobless Louisianans got the second-to-last enhanced unemployment payment Monday, Sept. 14. It’s not clear when the government will deposit the final $300 payment for the week ending Sept. 5.

“I don’t want to move, but I may not have a choice,” McNeal said. “I’m very worried and upset about our future.”

Gov. Edwards has repeatedly called on Congress to subsidize the state payments by making federal unemployment loans forgivable or by depositing cash into state coffers directly.

“That’s another reason why Congress needs to go back to work and sit down and figure out this next stimulus package,” he said. “I think the House of Representatives passed a bill that’s $600. The Senate introduced a bill that’s $300. Somewhere in there there’s got to be a compromise you’d think.”

To avoid the doomsday scenario where taxes increase and benefits decrease, congressional lawmakers would have to reach a deal before Louisiana’s Revenue Estimating Conference meets later in September.

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