House approves higher state taxes for unemployment

JEFFERSON CITY, Mo. -- Trying to reduce the taxes businesses pay to the federal government, the state House endorsed a bill Thursday that would instead have businesses pay higher unemployment taxes to the state.

As part of the legislation, the state could sell up to $450 million in bonds or get other loans to keep its unemployment compensation fund from going broke.

The bill, given initial approval on a voice vote, requires a second House vote before it moves to the Senate. A similar bill that authorized just $100 million in bonds was approved last year by the legislature but vetoed by Gov. Bob Holden.

Businesses typically pay a tax to the state and federal governments based on employee salaries and how likely the company is to lay off workers. The tax is then paid out to workers who are laid off or lose their jobs through no fault of their own.

But Missouri's fund has been bankrupt since early 2003.

When a state fund goes broke, the tax that businesses pay to the federal government is automatically increased -- kind of like an insurance policy for the state unemployment fund, said state Rep. Todd Smith, R-Sedalia. The state then borrows from the federal government's fund because its own fund is empty. So far, Missouri is $180 million in debt to Washington, Smith said.

If the bill passes and is signed into law, the state unemployment insurance fund would be in the black again in 2006. If the bill does not become law, the fund may stay insolvent until 2010, Smith said.

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Unemployment bill is HB1268.

On the Net:

Missouri Legislature: http://www.moga.state.mo.us