06 Dec 2011

Harkin, DeFazio Wall Street Trading and Speculators Tax Cited in Krugman Column on Ways to Reduce the Deficit

By Sen. Tom Harkin

MEMO

To: Financial Writers
From: Kate Cyrul for Senator Tom Harkin (D-IA); Jen Gilbreath for Congressman DeFazio (D-OR)
Re: Harkin, DeFazio Wall Street Trading and Speculators Tax Cited in Krugman Column on Ways to Reduce the Deficit
Date: Monday, November 28, 2011

In case you missed it, Senator Harkin and Congressman DeFazio's Wall Street Trading and Speculators Tax was cited in today's column by Paul Krugman entitled "Things to Tax."  Analysis conducted by the Joint Committee on Taxation found that the Wall Street Trading and Speculators Tax Act will raise $352 billion over the time period of January 2013 through 2021.  The Joint Tax Committee also estimated that the Act raises $218.6 billion in the last 5 years, on average over $43 billion per year.

For more information, please contact Kate Cyrul at (202) 224-3254 or visit http://harkin.senate.gov/ or Jen Gilbreath at (202) 731-0063 or visit http://www.defazio.house.gov/.

The New York Times

The Opinion Pages

 

November 28, 2011

Things to Tax

By PAUL KRUGMAN

The supercommittee was a superdud ? and we should be glad. Nonetheless, at some point we'll have to rein in budget deficits. And when we do, here's a thought: How about making increased revenue an important part of the deal?

And I don't just mean a return to Clinton-era tax rates. Why should 1990s taxes be considered the outer limit of revenue collection? Think about it: The long-run budget outlook has darkened, which means that some hard choices must be made. Why should those choices only involve spending cuts? Why not also push some taxes above their levels in the 1990s?

Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions.

About those high incomes: In my last column I suggested that the very rich, who have had huge income gains over the last 30 years, should pay more in taxes. I got many responses from readers, with a common theme being that this was silly, that even confiscatory taxes on the wealthy couldn't possibly raise enough money to matter.

Folks, you're living in the past. Once upon a time America was a middle-class nation, in which the super-elite's income was no big deal. But that was another country.

The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers ? roughly speaking, people with annual incomes over $2 million ? had a combined income of more than a trillion dollars. That's a lot of money, and it wouldn't be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.

For example, a recent report by the nonpartisan Tax Policy Center points out that before 1980 very-high-income individuals fell into tax brackets well above the 35 percent top rate that applies today. According to the center's analysis, restoring those high-income brackets would have raised $78 billion in 2007, or more than half a percent of G.D.P. I've extrapolated that number using Congressional Budget Office projections, and what I get for the next decade is that high-income taxation could shave more than $1 trillion off the deficit.

It's instructive to compare that estimate with the savings from the kinds of proposals that are actually circulating in Washington these days. Consider, for example, proposals to raise the age of Medicare eligibility to 67, dealing a major blow to millions of Americans. How much money would that save?

Well, none from the point of view of the nation as a whole, since we would be pushing seniors out of Medicare and into private insurance, which has substantially higher costs. True, it would reduce federal spending ? but not by much. The budget office estimates that outlays would fall by only $125 billion over the next decade, as the age increase phased in. And even when fully phased in, this partial dismantling of Medicare would reduce the deficit only about a third as much as could be achieved with higher taxes on the very rich.

So raising taxes on the very rich could make a serious contribution to deficit reduction. Don't believe anyone who claims otherwise.

And then there's the idea of taxing financial transactions, which have exploded in recent decades. The economic value of all this trading is dubious at best. In fact, there's considerable evidence suggesting that too much trading is going on. Still, nobody is proposing a punitive tax. On the table, instead, are proposals like the one recently made by Senator Tom Harkin and Representative Peter DeFazio for a tiny fee on financial transactions.

And here's the thing: Because there are so many transactions, such a fee could yield several hundred billion dollars in revenue over the next decade. Again, this compares favorably with the savings from many of the harsh spending cuts being proposed in the name of fiscal responsibility.

But wouldn't such a tax hurt economic growth? As I said, the evidence suggests not ? if anything, it suggests that to the extent that taxing financial transactions reduces the volume of wheeling and dealing, that would be a good thing.

And it's instructive, too, to note that some countries already have financial transactions taxes ? and that among those who do are Hong Kong and Singapore. If some conservative starts claiming that such taxes are an unwarranted government intrusion, you might want to ask him why such taxes are imposed by the two countries that score highest on the Heritage Foundation's Index of Economic Freedom.

Now, the tax ideas I've just mentioned wouldn't be enough, by themselves, to fix our deficit. But the same is true of proposals for spending cuts. The point I'm making here isn't that taxes are all we need; it is that they could and should be a significant part of the solution.

22 Nov 2011

New Study on Impediments to Economy

By Cynthia Magnuson

New Study Finds Economic and Political Uncertainty Top Impediments to Small-Business Growth

WASHINGTON, D.C., Nov. 22, 2011 ? A new study examining impediments to growth in the small-business sector reveals that 72 percent of small-business owners would like to expand by adding employees within the next five years, but various impediments are currently standing in their way.

According to Growth - External Factors, a report prepared by the National Federation of Independent Business (NFIB) Research Foundation, uncertainty and weak sales are the two primary impediments to small-business growth.

"There is no question that small businesses are responsible for a significant portion of the job creation in our economy," said William J. Dennis, report author and senior fellow at the NFIB Research Foundation. "Their growth and success is often contingent upon a litany of factors beyond their control - but within the purview of policy-makers in Washington. Impediments to growth may not be easily overcome, but if we are ever to bridge the gap between desired and actual growth, government officials must look at the problems small businesses face. Understanding the challenges should help with the formulation of policies that would help them to thrive."

The study found that business uncertainty and weak sales?identified as the two primary impediments to small-business growth? are currently limiting the ability of many owners to expand. While economic concerns rank high in the minds of owners, a large number of small businesses also report that uncertainty is a significant factor in making business decisions. Not surprisingly, the single most important indicator that would renew small-business owner confidence in business conditions is increased sales in their businesses. This is a fact supported by NFIB's monthly Small-Business Optimism Index report, which has identified poor sales as the top business concern for small firms for 16 quarters running.

Other notable survey findings include :

  • Uncertainty is a growth impediment impacting 61 percent of small employers; only 25 percent say uncertainty does not impact them. However, owners of the smallest firms and owners of the young firms were more likely to identify uncertainty as a concern than owners of larger small firms and more established firms. And while the majority of small employers who believe that uncertainty is a hurdle think of it as economic in nature (83 percent), a comparatively large number term their uncertainty as related to political questions. An extraordinary 51 percent who think uncertainty is an impediment to growth (38 percent of the small-employer population) blame the current political situation at least in part as obstructing their growth.
  • While the adverse impact of regulation is often challenging to identify, 40 percent of small employers say that regulatory or legal issues are an impediment to growth. The complex labyrinth of regulations as opposed to a specific regulation or set of regulations was more often cited as an obstacle, with 63 percent of this group (31 percent of the population) reporting that a current investment or project was impacted by a regulatory matter. One-quarter of those who find regulations to be a burden either cancelled a project scheduled for the next six months or abandoned investment and/or project plans.
  • Forty-one (41) percent reported the lack of finance as an impediment to growth and 19 percent ranked it a serious matter. Though 15 percent of small employers asserted that the lack of finance was their biggest obstacle to growth, 49 percent termed it a minor or no obstacle. More than half (53 percent) of small firm owners surveyed think that internally generated cash flows will be their most important source of financing desired investment over the next five years. Bank loans will be the second most common source. However, 33 percent of those identifying lack of finance as an impediment to growth say that existing financial obligations are "seriously constraining" their ability to finance desired business investment and another 44 percent say that it is constraining.
  • With the unemployment rate near 10 percent, finding skilled workers is still a struggle for small-businesses. Sixty-one (61) percent of those surveyed (24 percent of the total population) said the lack of skilled employees is an impediment to growth and indicated that they would hire at least one additional employee at the current market wage rate in the next six months if they could find people with appropriate skills. Over 37 percent (9% of the population) would employ more than one.
  • Just 15 percent of small-business owners cite the lack of a strong management or advisory team as an impediment to growth. Of the group currently possessing a management team, 47 percent are highly confident their current team can provide the necessary assistance to reach the firm's growth objectives in the next five years. Most citing this impediment want to add management employees rather than to change the ones they have.

The latest NFIB Small Business Poll, Growth - External Impediments, is available at http://www.nfib.com/growthstudy.

###


22 Nov 2011

Governor Quinn Encourages Consumers to Support Illinois' Small Businesses this Holiday Season

By Rick Martin

Proclaims November 26 "Small Business Saturday"

CHICAGO - November 22, 2011. Governor Pat Quinn today proclaimed Saturday, Nov. 26 as "Small Business Saturday" in Illinois to encourage shoppers to support the more than 500,000 small businesses in our state. Consumers are encouraged to use the Saturday after Thanksgiving, Nov. 26, between "Black Friday" and "Cyber Monday" - traditionally two of the busiest shopping days of the year - to shop at small businesses around the state.

"Thanksgiving weekend traditionally serves as the kick-off for the holiday shopping season, and we want all Illinois businesses to have a strong showing," Governor Quinn said. "I encourage people throughout Illinois to use this time to show their support for local merchants that contribute to our local economies, putting people to work and keeping our economy moving forward."

Small business success is critical to Illinois' and the nation's overall economy. According to the U.S. Small Business Administration, there are approximately 28 million small businesses in the United States, which have created 65 percent of new jobs over the past two decades. For every $100 spent in locally-owned, independent stores, $68 returns to the community through taxes, payroll and other expenditures, according to the 3/50 Project, a small business advocacy group.

"If every Illinois small business was able to create one new job, we'd lower the unemployment rate five points," DCEO Director Warren Ribley said. "'Small Business Saturday' continues our efforts to boost locally-owned businesses throughout Illinois by giving them the tools and support they need to succeed and grow."

In October, Governor Quinn launched Advantage Illinois, a new program for small businesses to access capital, thanks to more than $78 million from the federal State Small Business Credit Initiative (SSBCI). Advantage Illinois consists of three programs to spur institutional lending to small businesses and one program to leverage private venture capital in start-ups and high-growth businesses. Illinois expects to leverage at least $10 in new private lending for every $1 of federal funding, generating more than $800 million in private investments in Illinois' small businesses.

For more information on the state's small business resources, visit www.ildceo.net. A copy of the Governor's proclamation is attached.

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22 Nov 2011

Don't Let Black Friday Deals Leave You in the Dark

By Rick Martin
BBB Tips Help You Shop Smart, Online or at the Mall 

These days Black Friday deals seem to be out before the Thanksgiving turkey even gets cold; leaving many consumers overwhelmed with the pressure to buy, buy, buy.  The BBB recommends you do your research before shopping to ensure advertised deals are all they're cracked up to be.

"Some Black Friday deals may look good on the surface, but quantities may be extremely limited or the size of the discount greatly exaggerated.  Check prices at several retailers and read advertisements carefully to make an educated decision on whether it's worthwhile to stand in line or miss a good night's sleep," said Chris Coleman, BBB President/CEO. Shopping online can be a way to avoid crowded stores, but shoppers need to use extra caution when shopping on the web.

Whether you choose to buy online or at the store, be sure to:

 

  • ·  Protect your personal information. Stick to well known and trusted websites. When shopping at stores, keep your card out of sight and safe.
  • ·  If the site is secure, its address should start with https://. You also may see a picture of a small closed lock in address bar.
  • ·  Know the company's refund and return policies. Are there restocking fees? Do you have to pay shipping costs on returns?
  • ·  Do not rely on pictures of a product. Read the description and check model numbers, if applicable.
  • ·  Be cautious of free offers. Free offers are often followed by an open-ended enrollment in a program that automatically bills your credit card account. Before ordering anything online, make sure you click on and read all terms and conditions.
  • ·  Pay with a credit card rather than a debit card. If you suspect fraud or don't receive your order, credit cards afford the best protection in the event of a dispute.
  • ·  Obtain a tracking number for all shipments.
  • ·  Print out the orders and keep receipts.
  • ·  Be aware of phishing. Don't respond to emails that ask for your credit card or bank account number or other personal information. Legitimate businesses do not send emails claiming there is a problem with an order or account.  Call the company or find the customer service form on the company website to confirm any problem.
Check a company's BBB Business Review before you do business with a company or charity by going to www.bbb.org or by calling 800-222-1600. For more advice you can trust from your BBB, visit www.iowa.bbb.org.
22 Nov 2011

Braley to Discuss Vets Hiring Tax Credit in Cedar Rapids

By Jeff Giertz

For months, Braley has pushed veterans hiring tax credit; bill sitting on President Obama's desk

 

Washington, DC - This morning, Rep. Bruce Braley (IA-01) will hold an event at the Veterans Memorial Auditorium in Cedar Rapids to discuss the Wounded Warrior and Returning Heroes tax credits passed by the US House last week.  President Obama is expected to sign the bill into law as early as this week.

Braley will be joined at the event by veterans and officials with Alliant Energy.

In response to high unemployment rates for veterans, in August, Braley introduced the Combat Veterans Back to Work Act, a precursor to the House-passed bill that provides a payroll tax break for businesses who hire a current member of the National Guard or Reserve or any unemployed veteran who has returned from deployment within the last 18 months.

In October, Braley hosted a House Veterans' Affairs Subcommittee on Economic Opportunity field hearing in Waterloo to focus on veterans' unemployment.  Braley is the highest ranking Democrat on that subcommittee.

TODAY, Monday, November 21st, 2011

 

10:00am in the Lobby of the Veterans Memorial Building, 50 - 2nd  Ave., Cedar Rapids, Iowa

# # #
21 Nov 2011

Braley Lauds House Passage of Veterans Hiring Tax Credits

By Jeff Giertz

For months, Braley has pushed for tax credits for employers hiring veterans; House passes unanimously 

 

Washington, DC - Rep. Bruce Braley (IA-01) applauded the House passage this afternoon of the Returning Heroes and Wounded Warriors tax credits, which passed the House with a unanimous vote minutes ago.  These provisions would create new tax credit programs to spur the hiring of unemployed veterans and directly help hundreds of Iowa National Guard members who have returned home from overseas deployments. In August, Braley introduced the Combat Veterans Back to Work Act, a precursor to the tax credit programs that passed today.

"The best way to thank our veterans and tell them 'good job' is to help them find a good job when they return home," Braley said.  "I've been working for months to promote the idea of tax credits for businesses that hire returning veterans, and today's bipartisan vote shows that this issue has big support on both sides of the aisle.

 

"The tax credits passed by the House today will boost the hiring of veterans.  Other provisions will improve resources available for vets to translate their military skills into the civilian workforce and provide veterans with new tools to help them search for a job.  Unemployment among returning Iraq and Afghanistan veterans is three times the national average.  The bill passed today will help bring those numbers down."

 

Late this summer, 3,500 members of the Iowa National Guard returned from a deployment to Afghanistan.  More than 600 of these men and women reported being out of work when they returned home - equivalent to an unemployment rate of over 17 percent.  Iowa's unemployment rate in September was 6.0 percent; the national unemployment rate last month was 9.0 percent.

In response to high unemployment rates for veterans, in August, Braley introduced the Combat Veterans Back to Work Act, a bill that provides a payroll tax break for businesses who hire a current member of the National Guard or Reserve or any unemployed veteran who has returned from deployment within the last 18 months.

The Returning Heroes and Wounded Warriors tax credits build on Braley's bill, providing tax credits for employers that hire unemployed veterans and long-term unemployed veterans with service-connected disabilities.  The American Legion, Disabled American Veterans, Iraq and Afghanistan Veterans of America, and the Veterans of Foreign Wars have all endorsed the bill.

Yesterday, Braley released a letter sent to Republican and Democratic House leaders urging them to allow the House to vote on the tax credits immediately.

The bill will now be sent to the President for his signature.

Braley is the highest ranking Democrat on the House Veterans Affairs Subcommittee on Economic Opportunity.

# # #
21 Nov 2011

Senate Legislation Protects Small Business from Job-Crushing Health Insurance Tax

By Jennifer Cooper

Senators Barrasso, Hatch, Snowe Introduce Bill to Repeal HIT

 

WASHINGTON, D.C., November 16, 2011 – United States Senators John Barrasso (R-WY), Orrin Hatch (R-UT), and Olympia Snowe (R-ME) today introduced legislation, The Jobs and Premium Protection Act, to repeal the onerous Health Insurance Tax (HIT) which takes $87 billion away from small business by the end of the decade, resulting in a job-loss of 125,000 to 249,000 jobs in the private sector in 2021, according to a study released by the National Federation of Independent Business Research Foundation; small business will shoulder 59 percent of this job-loss burden.

"The Health Insurance Tax is a Washington policy that will have a devastating impact on our nation's job creators," said Susan Eckerly, Senior Vice President of Public Policy. "The stark reality is that the country's economy is still reeling, and every single job matters; the last thing people in the unemployment line want to hear is that one less job will be created and even more will be shed as a result of the HIT.  Because of the leadership of Senators Barrasso, Hatch and Snowe, small-business owners now have bipartisan and bicameral legislation that will repeal this tax and protect their ability to continue to create vital jobs."

"Our legislation repeals this unfair, hidden tax on America's job creators, and will save thousands of jobs across the country," said United States Senator John Barrasso.  "This tax is just another example of how the President's trillion dollar health spending law is only making things worse for small businesses and their workers. With 9 percent unemployment, hardworking Americans cannot afford to be hit hard by even higher premiums.  We need to stop the HIT on our economy now - before it starts."

"Chock full of tax hikes, mandates and government overreach, the President's $2.6 trillion health spending law is an anchor around our economy's neck," said United States Senator Orrin Hatch.  "The health law's insurance tax is especially damaging, undercutting our economic recovery by increasing the cost of health coverage.  Money that could go to higher wages, new workers, or investment will instead go to pay this new tax.  With insurance premiums already skyrocketing and unemployment hovering at 9 percent, this tax makes no sense.  The President is demanding jobs legislation; he should start by supporting the repeal of this tax."

"Preventing the new health insurance tax is critical, especially in the current economic environment," said United States Senator Olympia J. Snowe.  "As the cost of health insurance continues to rise unabated - another 9 percent on average this year - individuals and small businesses are struggling to afford coverage.  Meanwhile, the Democrats' health care law is set to impose this $60 billion tax and the Director of the Congressional Budget Office has confirmed this tax will be paid by the individuals and small businesses who buy health insurance.  This tax could increase the cost of health insurance by 15 percent for small businesses, and kill hundreds of thousands of jobs.  I am proud to be a sponsor of the Premium Protection Act, and remain committed to repealing the job-killing health care law, as well as to repealing its worst pieces."

The Health Insurance Tax, which goes into effect in 2014, will cost small-business owners, their employees and the self-employed, $87 billion in the first ten years and $208 billion in the following ten years; the tax impacts 2 million small businesses, 12 million employees and the self-employed who purchase in the individual market and 26 million employees who are covered by their employer, resulting in a cost of nearly $5,000 per family over a decade.

The NFIB Research Foundation's BSIM (Business Size Impact Module) model suggests that such a price increase will reduce private sector employment by 125,000 to 249,000 jobs in 2021, with 59 percent of those losses falling on small business. The BSIM is a dynamic, multi-region forecasting model that analyzes the impact of policy "shocks" on the economy.  The BSIM is unique in ability among models to forecast the economic impact of policy on U.S. businesses differentiated by the size of the firm; in this case, small business is defined as those firms with less than 500 employees (Small Business Association definition).

Representative Charles Boustany (R-LA) has introduced legislation in the House, HR 1370, to repeal the Health Insurance Tax and his legislation currently has 78 bipartisan cosponsors, leading the way for a bicameral and bipartisan repeal of the Health Insurance Tax.

###

15 Nov 2011

With Deficit Reduction Deadline Looming, Harkin, DeFazio Wall Street Trading and Speculators Tax Generates More Than $350 Billion

By Sen. Tom Harkin
Tuesday, November 15, 2011

With a deadline looming for the deficit reduction committee, lawmakers supporting The Wall Street Trading and Speculators Tax have sent a letter to the committee urging them to adopt their proposal.  The lawmakers, led by Senator Tom Harkin (D-IA) and Congressman Peter DeFazio (D-OR), outlined the revenue generating impact of their bill.  Analysis conducted by the Joint Committee on Taxation found that the Wall Street Trading and Speculators Tax Act introduced earlier this month will raise $352 billion over the time period of January 2013 through 2021. The Joint Tax Committee also estimated that the Act raises $218.6 billion in the last 5 years, on average over $43 billion per year.

"As you work to craft a comprehensive deficit reduction plan, we believe you should incorporate reasonable spending cuts and ask the wealthiest Americans and most profitable corporations to pay their fair share. However, we understand through media reports and talking to our colleagues that revenue options remain the largest challenge in your negotiations to obtain significant deficit reduction. We believe we have a viable revenue option that deserves serious consideration," wrote the lawmakers. "Given the extraordinary profitability of Wall Street banks while the rest of the economy is suffering, there is no question that Wall Street can easily bear this modest tax. In fact, while Wall Street lobbyists will express great concern with our proposal, they will not tell you that the European Union is considering a similar proposal, but with a tax rate that is more than three times higher."

The Wall Street Trading and Speculators Tax places a small tax of three basis points (3 pennies on $100 in value) on most non-consumer financial trading including stocks, bonds and other debts, except for their initial issuance.  For example, if a company receives a loan from a financial company, that transaction would not be taxed.  But, if the financial institution traded the debt, the trade would be subject to the tax.  The tax would also cover all derivative contracts, options, forward contracts, swaps and other complex instruments at their actual cost.  The measure excludes debt that has an original term of less than 100 days.  

The full text of the letter can be found here.
15 Nov 2011

Senate Passes Tax Incentive to Encourage Hiring of Veterans

By Grassley Press

WASHINGTON - Senator Chuck Grassley today welcomed Senate passage of a version of the veterans hiring legislation he and Senate Finance Committee Chairman Max Baucus introduced in January and urged House of Representatives passage as soon as possible.

"These men and women are extremely capable," Grassley said.  "They have a lot of skills to offer in the workplace.  The legislation that Senator Baucus and I put together clears some bureaucratic hurdles and adds a financial incentive to encourage employers to seek out veterans.  These steps are a logical follow-up to my effort to increase the IRS' hiring of veterans.  The IRS saw the value of this pool of potential workers and followed through on increased hiring of veterans.  Other employers, including small businesses, should have similar opportunities."

The legislation approved by the Senate today was based on the Veterans Employment Transition Act, or the VETs Jobs bill, introduced by Grassley and Baucus in January.  A previous version of this credit, which was part of the Work Opportunity Tax Credit and also authored by Grassley and Baucus, was designed to help employers hire veterans but expired at the end of 2010.

The new version of the legislation would reinstate the tax credit and make it easier for veterans and small businesses to use.  As a result, servicemen and women who have been recently discharged would be able to provide documentation directly from the Department of Defense without having to go through the tax credit's current certification process.

The credits will range from up to $2,400 to up to $9,600 in 2012 depending on the veteran hired.  Tax exempt organizations are eligible for the credit.  The credit is only available for calendar year 2012. The credits are 40% of the veteran's wages up to $24,000.  The credits total:

  • $9,600 for veterans with service-connected disabilities unemployed for 6 months or longer in the past year.
  • $5,600 for veterans unemployed for 6 months or longer in the past year.
  • $4,800 for service-disabled veterans hired within 1 year of being discharged.
  • $2,400 for veterans who do not fit any of the above categories and are unemployed for between 4 weeks and 6 months in the past year.

Any veteran who has left active duty in the past five years who has discharge paperwork showing 180 days of qualified active duty would be eligible for the credit. This would include those men and women who were activated by their states as members of the National Guard.  The bill also helps service members market themselves to prospective employers by requiring the military to educate service members about how the credit works.

Noting that the unemployment rate for veterans is higher than for non-veterans nationwide, the senators first introduced the VETs Jobs bill in May 2010.

-30-
14 Nov 2011

Governor Quinn Applauds Passage of Legislation to Strengthen Unemployment Insurance Program

By Andrew Mason

Bi-Partisan Reforms Will Save Businesses $400 Million, Encourage Growth

SPRINGFIELD - November 10, 2011. Governor Quinn today applauded the passage of bi-partisan legislation to strengthen the integrity of Illinois' unemployment insurance program. The reforms - supported by numerous groups, including the Illinois Retail Merchants Association and the Illinois AFL-CIO - are expected to save Illinois businesses more than $400 million, provide 16 percent unemployment insurance tax reductions for companies that have not laid off workers, and identify and punish those that defraud the unemployment system.

"We are in difficult economic times, and we need to bolster our unemployment insurance program to protect both workers and businesses," Governor Quinn said. "As we did with our workers' compensation overhaul this spring, we brought everyone to the table to find a solution. I want to thank representatives of labor, business and the General Assembly whose hard work and collaboration created a package of reforms that will reward Illinois companies for sound business practices, protect those laid off through no fault of their own and give our companies the confidence to grow."

Illinois' Unemployment Trust Fund (UTF), like all unemployment trust funds, is designed to be resilient to economic movements, running deficits during downturns and building a surplus during times of prosperity. Due to the ongoing national recession, however, the self-correcting unemployment trust funds in more than half of U.S. states currently carry a negative balance. Illinois is expected to end 2011 with $2.4 billion in outstanding loans from the federal government to cover state unemployment benefits. Without the agreement, in 2012 federal penalties would result in increased unemployment insurance taxes for companies throughout Illinois, regardless of whether they have laid off workers.

The legislation allows Illinois to issue non-General Revenue Fund (GRF) bonds during a period of historically low interest rates to keep the fund solvent, without shrinking benefits and preventing additional taxes to businesses. The bonds prevent continued UTF borrowing at 4 percent interest from the federal government, saving the state an estimated $240 million (nearly $82 million in interest payments in 2012 alone). The bonds are paid for entirely by businesses normal contributions to the UTF and require no payments from the GRF, freeing money for other state obligations.

The bill also will save businesses more than $400 million through 2019 by preventing the penalty taxes that further federal borrowing for the UTF would create. In addition, the agreement will provide significant tax reductions to the nearly 46 percent of Illinois employers (more than 143,000) that have not laid off workers during the recession. Under this legislation, companies that have avoided layoffs will see, on average, a 16 percent reduction in their unemployment insurance taxes in 2012.

"Businesses need a degree of tax certainty to successfully grow in this economy. This legislation will provide the tax relief to make that happen while making the trust fund solvent," David Vite, president of the Illinois Retail Merchants Association, said.

"This bill recognizes the difficult decisions necessary to prime the pump of this economy," Tim Drea, secretary-treasurer of the Illinois AFL-CIO, said. "We recognize that the best economic environment in Illinois occurs when business and labor work together."

The reforms also introduce new tools to prevent and recover fraudulent payments, which will help restore UTF solvency. The legislation will, for the first time, allow the state to garnish federal tax returns of individuals who purposefully collect unearned unemployment insurance benefits and establish personal liability for individuals who defraud the unemployment insurance program of taxes owed.

"This legislation will help our businesses regain their footing and provide certainty so they can appropriately prepare for the future," Illinois Department of Employment Security Director Jay Rowell said. "Although the lingering effects of the national recession echo across our country, we must not let that uncertainty prevent sound proposals that will help our local economy."

The unemployment insurance program is a joint federal-state effort, coordinated by the U.S. Department of Labor and the Illinois Department of Employment Security. Businesses' unemployment insurance taxes fund the UTF, and those contributions fund unemployment insurance benefits to qualified workers. The amount businesses pay is tied to their experience with the program; the more employees a business lays off, the more they must contribute to the fund to support the increased stress on the UTF.

The UTF provides benefits to individuals laid off through no fault of their own based on their income over the previous four quarters. Unemployment benefits provide temporary assistance until an individual is able to find meaningful employment. Temporary payments also help communities in times of economic stress by ensuring continued spending in the local economy.

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