The Washington Times - February 8, 2011, 09:09PM

Businesses could face higher taxes under a new Obama administration proposal designed to help cash-strapped states replenish their unemployment insurance pools.

The plan would give states the choice of increasing tax payments from businesses, altering their benefits or a combination of both.


The proposal would increase the income level that is subject to unemployment insurance taxes to $15,000 from $7,000. It also calls for cutting in half the federal tax rate used for unemployment insurance, meaning the federal government would not see an increase in revenue from the adjustment.

States would be allowed to use the new income level to raise more money from employers. Congress would have to approve the recommendation.

The plan would help states make up for budget shortfalls and give them time “to rationalize what they offer and how they pay for it,” said White House spokesman Robert Gibbs on Tuesday.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, blasted the plan, calling it a “job-destroying proposal.”

“The administration’s so-called cure to our high unemployment rate could actually make things worse,” he said. “By more than doubling unemployment taxes from $7,000 to $15,000, either employers will have less money to hire or workers will face reduced wages.”