As we’ve written before, Washington businesses face a major increase in unemployment insurance taxes next year, unless the Legislature acts. Association of Washington Business president Kris Johnson lays out the challenge clearly in a commentary.
Before the Legislature arrives for the 2021 session, some businesses in Washington will already be facing the very real prospect of a 500 percent tax increase.
That’s on day one, before lawmakers even begin to talk about passing new taxes like an income tax, a capital gains tax, or a tax on high-income earners.
And it’s coming at a time when most employers can least afford it.
The state’s UI trust fund has paid out billions of dollars in UI benefits, he writes.
By the end of the year, officials estimate Washington will have paid out approximately $5.3 billion in unemployment benefits, compared to just $1.01 billion in 2019. This was before the November restrictions went into place.
This is the system working as it is supposed to work. Washington’s unemployment insurance program is designed to be a safety net for workers who lose their jobs through no fault of their own. A global pandemic and the abrupt shutdown of major parts of the economy is certainly no fault of those who lost their jobs.
But it’s also no fault of the businesses, and unless lawmakers take action to head off the looming crisis, it could be a disaster for many employers that are already struggling to survive.
As he reports, replenishing the trust fund falls on employers in the form of tax increases.
For many businesses, this will mean dramatic increases in the amount they pay in UI taxes. The numbers will vary based on industry, but it’s possible that a business could go from paying $50 per employee in UI taxes to $277 per employee.
This kind of increase will likely trigger more layoffs, leading to a downward spiral that puts even more strain on the UI system and delays the economic recovery we desperately hope to see in 2021.
There’s more in his commentary. No one can argue with his conclusion.
One of the best ways that legislators can help employers is to follow the lead of doctors and seek first to do no harm. Hard-hit businesses will need help recovering from this once-in-a-century crisis. Lawmakers can jumpstart the recovery by not saddling employers with additional taxes and regulations at such a precarious moment.
And they can provide a huge boost to struggling employers by heading off the looming UI disaster.
Lawmakers will be facing many challenges when they convene in January. Unemployment insurance must be at the top of their to-do list. Employers need assurance that help is on the way.