The director of the D.C. Unemployment Compensation Board said yesterday that the city will probably have to increase the unemployment tax imposed on businesses here to repay $52.4 million borrowed from the federal government to subsidize payments to jobless persons.
The city has been forced to borrow the funds since 1975 because it has not raised enough money through the present unemployment taxation system to make compensation payments.
On Monday, the Department of Labor gave city officials until Nov. 10 to devise a satisfactory plan to begin repaying the loans. Otherwise the federal government will, in effect, itself increase the tax by raising the unemployment taxes it imposes on Washington's employers.
William V. Wilkerson, the unemployment board's director, said yesterday that a plan to increase the taxes is now being discussed, but he gave no details of the proposal. Wilkerson did say, however, "there's a definite need for increasing it. That's being worked on at the present time."
Mayor Walter E. Washington minimized the financial impact that erasing the $52.4 million debt would have on the city. "I always worry about money, but I think it's manageable," he said.
However, John R. Tydings, assistant executive vice president of the Metropolitan Board of Trade, said the business community could support increased taxes only if the city improves its administration of the unemployment compensation program and purges the rolls of questionable payment recipients.
"We would oppose an increase in unemployment compensation taxes in the absence of seeing any improvement in the unemployement system," Tydings said. "I think business people want to see an improvement in the system as it relates to screening applicants, proper and equitable procedures for disqualification and more comparability of the city program to the regional program.
"We think there needs to be a tightening-up on the unemployment rolls so you don't have people on there who are unfairly using it as a welfare program, because it's [supposed to be] an insurance program," Tydings said.
The city makes unemployment compensation payments to an estimated 16,000 persons each month. In order to be eligible for a payment, a person must have worked regularly during six of the preceeding 12 months and have earned a total of at least $450.
Last year unemployment in the District averaged 7.1 per cent, causing the city to borrow $26.6 million from the federal government - more than half of the money that the city must now start to repay.
The District's unemployment compensation bill has been increasing steadily since 1974. In that year the city paid out $48.6 million. In 1975 the figure climbed to $77.9 million - an increase of 60.3 per cent.Last year regular city unemployment benefit payments stood at $81.4 million.
Tydings said he does not believe that the high unemployment rate of recent years is solely responsible for the current deficit in the city's unemployment compensation funds. "The roots of this problem go way back before the recession. The roots of the problem go back a number of years," Tydings said.
The city's unemployment compensation tax, which last year raised $13.7 million, is based on a levy of 2.7 per cent on employers for the first $4,200 of wages paid employees. The federal government imposes a 3.4 per cent tax against the same amount. However, the 2.7 per cent paid to the city's unemployment fund counts as a tax credit for businesses, thus leaving the federal government with a .7 per cent unemployment tax.
In order to go beyond the 2.7 per cent rate, as several other states with similar problems have done, a change in current city law is required. Asked why the city has not implemented such a change, Wilkerson said: "That's a good question . . . we just haven't reached the point yet where we thought it was necessary to push something through."