A study in inequality

S.C. data indicate tax system to pay jobless benefits is unfair

Businesses that frequently lay off workers might be doing so at the expense of most other South Carolina businesses, according to an analysis of unemployment data by the S.C. Department of Commerce.

The data, said Commerce researcher Rebbecca Gunnlaugsson, show a small percentage of companies account for about one-third of all unemployment benefits paid. Meanwhile, companies with steady employment are charged at a higher minimum unemployment tax rate than neighboring states, she said, and businesses that lay off employees more - often manufacturers or seasonal industries such as tourism - often are charged at a lower maximum tax rate than other states.

The result, Gunnlaugsson said, is that firms that seldom lay off workers might be subsidizing firms that frequently cut jobs more heavily than anywhere in the United States. Just 3 percent of companies account for 30 percent of benefits paid, she said, but pay just 8 percent of contributions into the trust fund.

S.C.'s unemployment taxes, she said, might encourage manufacturers to locate here but sway other companies to choose other states.

The data were presented Thursday to a panel studying how to replenish South Carolina's currently bankrupt jobless benefits trust fund. South Carolina has borrowed more than $560 million from the federal government to maintain benefits, and those loans could total $1 billion at an annualized rate.

At 11.5 percent, South Carolina has the sixth-highest jobless rate in the country.

The problem is significant since businesses could have to pay higher taxes - between $249 and $567 per employee per year for more than two years, according to one proposed plan - to refill the fund and repay the loan. State taxpayers could have to repay an estimated $350 million in interest on the federal loans.

Gov. Mark Sanford has organized a meeting Tuesday to debate the issue. Lawmakers will have to approve any changes to unemployment taxes.

John Rainey, chairman of the S.C. Board of Economic Advisors, said the data show South Carolina needs an independent party, someone with no economic or political connection to the state, to evaluate the state's unemployment system and taxes and recommended changes.

"We tend not to recognize a problem until it becomes so big it's almost unmanageable," Rainey said.

Employment Security Commission chairwoman Becky Richardson also said Thursday that the agency has hired an interim director while it seeks a replacement for Ted Halley, who leaves the agency Nov. 6.

Former commissioner Samuel R. Foster will lead the agency until a nine-member panel chooses the new agency director, Richardson said. The agency has hired the S.C. Budget and Control Board to conduct a candidate search.