PANEL PASSES BILL TO CUT UNEMPLOYMENT TAXES

Sept. 8, 2001 – A step toward shrinking the territory's bloated $58 million Unemployment Insurance Trust Fund was taken Friday by the Senate Labor and Veterans Affairs Committee.
The committee approved a bill which would reduce the minimum required payment to the fund from the current 0.1 percent to zero. The measure also would do away with language which requires businesses with a negative balance to pay 5.4 percent of their taxable payroll into the fund.
The new legislation will bring the Virgin Islands into compliance with federal guidelines requiring only that the fund be maintained at a level higher than the amount of money the territory pays to laid-off workers. If the fund isn't reduced by the end of 2001, the territory risks having the federal government take control of it.
Sen. Norma Pickard-Samuel, who chairs the committee, met with U.S. Labor Department officials in Washington, D.C., in June to discuss the matter. She learned that federal Labor and Interior Department officials have known for years that the Virgin Islands has a substantial amount of money in the trust fund. Some expressed surprise that the territory had not sought to tap into the fund before now.
Employers with a negative rating from the preceding year — that is, whose ex-workers drew more benefits than the employer paid in taxes — are assessed unemployment taxes at 5.4 percent on the first $15,000 of each employee's salary. The formula is the same whether a company's account was in the red by $1 or $100,000. At the end of the year, if the taxes they have paid exceed the year's claims levied against them, the rate drops sharply.
The Virgin Islands has the highest unemployment tax in the United States. In other jurisdictions, the experience ratings are handled in more nuanced ways, and their trust funds do not swell excessively. One Washington observer called the V.I. system "inept."
Pickard-Samuel said V.I. employers have "grossly overpaid" the unemployment insurance tax and that the corrective legislation is to halt what she termed a "roller-coaster effect." She said the legislation "will bring relief to this overburdened fund and trickle down to our hard-working government." She also said about 90 percent of all V.I. businesses wouldn't have to pay the tax, and that only employers who aren't current on their tax payments would have to do so.
Much of Friday's long committee meeting was taken up with discussion on an amendment by Pickard-Samuel and Sen. Celestino A. White that would require businesses to pay a surcharge of 0.1 percent into a "Labor Administrative and Training Fund."
The amendment met with strong objections from Attorney General Iver Stridiron; Labor Commissioner Cecil Benjamin; attorney Charles Engeman of the St. Thomas law firm Ogletree Deakins; other labor officials; and all senators except the sponsors and Sen. Norman Jn. Baptiste.
Benjamin said, "We don't want to rush into this surcharge issue." He said employers in the territory shouldn't have additional anxiety and that "We need to look carefully … at such a measure."
Stridiron said the fund might conflict with federal and V.I. law governing use of money deposited in the Unemployment Insurance Fund. Engeman said the surcharge looked like a new tax. "We need relief for the employers, not additional taxes," he said.
"This is not a new tax," Pickard-Samuel retorted. "This is the reduction of a very old tax." She added, "The Department of Labor always wants more time; I am not gong to give you more time. Things are not being taken seriously around here. I am not playing your games any longer."
The amendment died when Sens. Lorraine Berry, Douglas Canton and Vargrave Richards voted against it. The bill itself was approved and sent to the Rules Committee without objection.
Committee members present were Berry, Canton, Jn.-Baptiste, Pickard-Samuel, Richards and White. Sen. Donald "Ducks" Cole was absent.

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