INDIANAPOLIS — President Barack Obama's administration is set to unveil today a budget proposal that would give states like Indiana, which has borrowed $2 billion to keep its unemployment insurance fund solvent, some room to breathe.
But Gov. Mitch Daniels and Republican state lawmakers are saying no thanks.
The Obama administration's proposal would cancel planned increases in business taxes in 2011 and 2012 to give states more time to start repaying loans that total $42 billion nationwide.
It would allow states to address their unemployment funds' shortfalls by increasing business taxes, reducing benefits or both.
White House spokesman Robert Gibbs said the administration's plan "would help states make up for the shortfalls they have and give them time to rationalize what they offer and how they pay for it."
It would do so in part by increasing the amount of income that is subject to unemployment taxes from a worker's first $7,000 to a worker's first $15,000.
It also would cut the federal unemployment tax rate in half, so that the federal government wouldn't see any benefit. States, though, could use the new room to collect more taxes from employers.
Daniels said he doesn't find that option to be a good one.
"It's another one of those short-term goodies, long-term costs. I don't think it's very attractive," he said.
Indiana is already set to increase unemployment taxes on businesses by hundreds of millions of dollars each year.
It will do so through a new tax rate plan that expands the taxable wage base to $9,500, raises rates for businesses that lay off the most workers and lowers rates for businesses that lay off the least.
Rep. Dan Leonard, R-Huntington, has authored a bill that would slow down the onset of new taxes so that Indiana could repay its loan by 2018 or 2019, he said. That proposal has passed the House and is now set for a vote in the Senate.
Leonard's tweaks also would set weekly benefit levels at 47 percent of what that applicant earned, on average, each week of the prior year. That's a reduction of roughly $60 to $70 from the state's current $283 average weekly benefit.