Unanimous General Assembly votes to block unemployment insurance tax hike

State lawmakers voted unanimously Wednesday to block an automatic tax increase on employers. Senate Bill 311 would maintain the state’s current tax for funding unemployment insurance.

A 45-o vote in the state Senate came 90 minutes after the House approved the measure, 110-o. The unemployment insurance provision was added to another bill already in negotiation between the two legislative chambers.

Legislative rules will require a final vote on a separate day. Final votes could take place Thursday.

“North Carolina is the best place in the country to start a business because of low-tax, low-spending Republican policies,” said Sen. Kevin Corbin, R-Macon, in a news release. “This bill to maintain the current low unemployment insurance tax rate is yet another example of the pro-business, pro-economy Republican philosophy.”

S.B. 311 freezes the 1.9% employer base contribution rate to the Unemployment Insurance Trust Fund for 2022. Without legislative action, that rate would rise automatically.

“[T]he tax on employers would have jumped because of an automatic formula that triggers tax rate changes based on the balance in the unemployment insurance reserve,” according to Corbin’s release.

“That reserve still has a healthy balance of about $2.9 billion, but it’s below previous levels because so many people received unemployment benefits during the pandemic.”

“Because there is no expectation of another protracted unemployment crisis that threatens the unemployment reserve, legislators thought it best to avoid a rate increase and freeze the current unemployment tax rate at 1.9%,” according to Corbin’s release.

The nearly $3 billion balance in the current fund offers a stark contrast to the situation in 2013. At that time, the state owed $2.8 billion to the federal government. North Carolina had borrowed money from the feds to fund unemployment benefits during the Great Recession.

With a concerted effort from the General Assembly and then-Gov. Pat McCrory’s administration, the state paid off that debt by 2015. Policymakers then took steps to ensure the unemployment trust fund would not face a similar shortfall in the future.