Republicans Close Corporate Loophole--No Kidding!

In a development that I must admit has me scratching my head in befuddlement, the Republican Senate, previously one of the best friends corporate America has ever had (except for Bush, Cheney, and the Republican House, but they're not so much 'friends' as 'employees'), is about to vote to--and this is the part I don't get--close a legal loophole that has saved some big corporations from paying $$Million$$$ in unemployment premiums. What this article describes is a scam well-known to a lot of people who have worked as temps over the last decade--including a couple of friends of mine--and got hooked in participating in it.)

Tougher Rules for Unemployment Premiums Clear Senate

By Albert B. Crenshaw
Washington Post Staff Writer
Saturday, July 24, 2004; Page E03

The Senate gave final congressional approval Thursday night to a bill that would require states to close loopholes in their unemployment insurance laws that have allowed unscrupulous employers to dodge millions of dollars in premiums.

The loopholes have allowed employers who lay off many workers to avoid the higher premiums that usually result, and they have cost state and federal unemployment insurance funds millions, possibly billions, of dollars, according to the Government Accountability Office and state officials. Other employers have been forced to pay higher premiums to offset these losses.

Carl T. Camden, president of Kelly Services Inc., the big temporary employee firm -- and one that faces higher premiums -- has been campaigning for tighter laws. He called the quick congressional action very gratifying.

Unemployment insurance premiums are based on experience, that is, whether a company has a history of layoffs, which cause workers to become eligible for benefits. The more layoffs a company has had, the higher its premiums.

But new companies are often given a clean slate, offering sharp operators an opening.

In a typical version of the strategy, a company that has had lots of layoffs forms a new subsidiary, which in many states is entitled to a low "new company" rating, and shifts most of its workers to it. State unemployment taxes are levied on a per-worker basis, so the shift results in big savings for the company, in many cases millions of dollars.

A GAO study last year found that laws in more than half the states do not clearly forbid such a shift.

The bill, passed by the House on July 14, requires states to close this loophole, and to develop methods for detecting violations. It imposes penalties on companies that engage in the practice and on promoters of the strategy.

Camden acknowledged yesterday that it may take states some time to comply, but in the meantime "it chills future action" by companies that might have been considering the move.

Companies will "know the legal heat has been turned up," he said. "At least you could claim prior to this point [that the law] was ambiguous. It's not ambiguous now."

Backers say they expect President Bush to sign the bill.

The scam revolved around the corporation creating a dummy company which it then pretended was new in order to take advantage of a break that was meant for genuinely new companies struggling to get by, the kind of company that couldn't be sure from one month to the next whether it would be able to meet its payroll or have to lay off workers. When the law was passed originally, the Congress was trying to encourage small companies to hire more workers earlier than they might have otherwise by lowering the unemployment premiums they would have to pay if their optimism didn't pan out.

But rather than that, the corporations jumped all over the 'loophole' to avoid paying the $$$tens of millions$$$ they would otherwise have owed because of their 'just in time' hiring strategy.

Give these guys an inch, and they'll drive a corporate jet through it.

What I don't get is, why is the Republican Senate suddenly concerned about temporary workers and their unemployment checks? Why are they suddenly, after years of pandering to the very same corporations, biting the hand that feeds them? Don't tell me that the deficit is so huge it's scaring them into starting to re-claim some of the $$$TRILLIONS$$$ in taxes and penalities and premiums the corporations have ducked out of paying using technicalities and loopholes just like this one.

It can't be that, can it?