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Unemployment benefit cuts, higher taxes projected

By SCOTT BAUER
Associated Press Writer

MADISON, Wis. (AP) — Benefits paid to unemployed workers will have to be cut and taxes on struggling businesses will have to go up to pay for a staggering number of claims due to the recession, Wisconsin lawmakers were told Wednesday.

However, no benefit cuts or tax increases will be recommended to the Legislature this year, Department of Workforce Development Secretary Roberta Gassman told the Assembly’s Labor Committee.

A council made up of business and labor representatives that advises the department recommended against taking action now for fear it could disrupt economic recovery and due to uncertainty with how Congress may act.

“Neither employers nor laid-off employees are in a position to shoulder an additional economic burden at this time,” said the letter sent March 4 to chairs of the state Senate and Assembly Labor committees. It was co-signed by council members Phillip Neuenfeldt, secretary treasurer of the state AFL-CIO, and James Buchen, vice president of government relations for Wisconsin Manufacturers and Commerce.

Wisconsin ran out of money to meet the skyrocketing unemployment and demand for unemployment benefits and began borrowing from the federal government more than a year ago. Thirty-one other states are also borrowing because state money is tapped out.

In 2007, before the recession started, less than $1 billion was paid to the unemployed in Wisconsin who were eligible for up to 26 weeks of benefits.

In 2009, benefits could be tapped for up to 93 weeks and the state paid out $3.1 billion, more than triple what it did two years prior.

Wisconsin’s debt to the federal government is expected to double from the roughly $2.1 billion that is owed now to nearly $2.4 billion by 2014, said Hal Bergan, administrator of Wisconsin’s unemployment insurance program.

Paying that off will require both a reduction in benefits and higher business taxes, Gassman said.

Businesses are already being taxed more.

The amount of wages that could be taxed went up this year and is scheduled to go up again in 2011 and 2013. Overall tax rates also increased in 2010 and businesses will be subject to a special assessment starting in 2011 to begin paying off the interest on the money borrowed from the federal government, the advisory council letter to lawmakers said.

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