Give Us a Break

The Providence Journal has an update on the declining unemployment fund and plans to raise taxes to replenish it. According to the story, the issue is even more complicated than it might at first seem. If and when more revenue kicks in, the state has had to borrow $146.5 million from the federal government to cover unemployment payments. Federal law also waives interest payments until 2011, but in order to make sure it has enough money for the payment, the state has to enact any new taxes this summer. Here’s another wrinkle: money from the unemployment fund itself cannot be used for the interest payments. So, one idea is to add to the tax businesses pay for the Temporary Disability Insurance program, or TDI. The rate would go up from 1.2 percent to 1.3 percent, or $58 for some workers, netting the state $13 million. Here’s our question: Why the heck does the state owe the federal government interest on this loan in the first place? We can certainly think of better things to do with that $13 million than helping the federal government get into the lending business.

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One response to “Give Us a Break

  1. Pingback: Taxing Times « OSPRI BLOG

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