Unemployment Tax Hike Unavoidable

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NASHVILLE, Tenn. (AP) - Gov. Phil Bredesen said another tax hike to shore up Tennessee's unemployment trust fund appears unavoidable.

Asked after budget hearings with the state Labor and Workforce Development Department on Wednesday whether the increase will be necessary, the governor said: "I don't think there's any question."

A new law enacted this year increased the amount of an employee's wages subject to the unemployment tax from $7,000 to $9,000 and raised the tax rate by 0.6 percentage point.

Bredesen said the Legislature should consider setting up automatic increases to make sure the fund doesn't run out of money.

The federal government would take over the fund if it became insolvent.

The Tennessee Constitution prevents the state from borrowing money for government operations.

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