Indiana

Help Wanted

By Abdul Hakim-Shabazz

As Indiana lawmakers look for ways to solve the state’s unemployment trust fund shortfall, I have a thought I’d like to share with them.  Maybe the state should get out of the unemployment benefit business altogether.  Before you call me crazy there are some benefits to such a move.  The state gets a billion dollar albatross off its back,  employers no longer have to play collection agency and there is potentially more money in the pockets of workers.

Right now, the state’s unemployment trust fund has about a $642 million shortfall.    That comes in part from a more than $435 million deficit and $222 million benefit payout.  If you think Indiana is bad, try Michigan with a $1.9 billion shortfall or California with a $1.7 billion deficit.    These are dollars that could go towards other state programs like education or be returned to businesses and taxpayers in the form of tax cuts.

For now lawmakers are looking at raising taxes on employers as a way to close the shortfall.  Raising taxes should always be a measure of last resort.  More taxes means businesses will have less revenue and the odds increase of having to layoff employees.  More layoffs means more unemployment  and with fewer people paying into the system, the shortfalls grow even larger.   Behold, the vicious circle.

Removing the government out of the equation the responsibility for unemployment will be put exactly where it belongs, on the worker.  Individuals should be responsible for their own unemployment insurance. By not having to pay unemployment, the money would be transferred to the worker or the employer could use the funds to hire more workers.  And there is a big benefit for the self-employed who, if memory serves me correct, have to pay unemployment taxes, but can’t get the benefit.  Individuals could buy whatever plan that best suits them and rates would be based on how much of their income they want to have while they’re out of a job and how long they want the benefits to last.

For those of you think people won’t take their extra money and buy unemployment insurance, but instead pocket the cash, welcome to the world of individual choices and personal responsibility.  Those individuals will have to live with the consequences of their actions.   But like most people who buy life and car insurance, I think most of the population will be fine.  In addition, a new cottage industry of unemployment insurance providers will spring up, and ironically, employ more people.   

So if I was an Indiana lawmaker, once this crisis is over, I would seriously look a a plan to phase out Indiana’s participation providing unemployment insurance.   It obviously isn’t doing any taxpayer a whole lot of good right now.

Full post as published by Indiana Barrister on April 22, 2009 (boomark / email).