One of Gov. Martin O'Malley's signature efforts this year -- a plan to cut the hefty unemployment-benefits taxes paid by businesses -- has not gained the support of the business community, despite weeks of talks, a senator said today.

"I don't think the tax cut is going to be a reality," said Sen. Thomas M. Middleton, a Democrat who has been in numerous discussions with business groups, the governor's office, labor and other stakeholders. "That's my gut feeling. We're moving away from it."

Middleton, who heads the Senate Finance Committee and the Unemployment Insurance Fund Task Force, had given the work group a deadline of today to reach a consensus, though he says talks will continue on early next week.

"We're running out of time," he said. The state Department of Labor, Licensing and Regulation must tell businesses how much in unemployment insurance they need to pay this year in letters that typically go out March 1.

The O'Malley plan would increase the number of out-of-work Marylanders eligible for benefits so that the state can apply for nearly $127 million in federal stimulus money to prop up the depleted unemployment-insurance fund that businesses pay into through a tax formula. The governor proposed using $83 million of the federal money to reduce the taxes paid by businesses.

Business groups, including the Maryland Chamber of Commerce and Maryland Retailers Association, have said the one-time cash infusion would be quickly outweighed by the permanent costs -- estimated at about $20 million annually -- that come with the required increase in benefits.

Middleton said new problems have emerged in discussions.

For one, he said, most business groups would prefer to keep all of the federal money in the fund rather than using any of it to cut their taxes, believing that a healthy fund is more important than rate relief. And before they would sign onto the effort to go after federal money, the business groups would need assurance that the cost of the new benefits would be offset by cutting some existing benefits. Middleton said all of the stakeholders are furiously researching what cuts could be made.

Moreover, the senator said, businesses dislike the idea of tapping federal stimulus money altogether. To reach a deal, Middleton said, the business groups "need to get over the feeling that stimulus money is bad... Right now they're saying, 'We don't want anything to do with the federal stimulus.'"

Aides to the governor remain hopeful, and the discussion continues.

"We are actively working with employers to reach a consensus on the remaining issue -- rate relief -- and will do so as long as people are willing to talk," said Joseph Bryce, O'Malley's chief legislative officer. "We’re all pulling in the same direction and trying to help ease the burden on employers."

Meanwhile, other parts of the governor's unemployment-insurance proposal, including spreading out the payments and reducing interest for late payments, have gained broad support and appear poised for passage by lawmakers, Middleton and Bryce said.