Editorial urges governor and Legislature to reduce anticipated surge in unemployment taxes; state sees another spike in claims.

The Seattle Times editorial board points out that the anticipated increase in unemployment insurance taxes must be stemmed to avoid more economic hardship in 2021.

Washington is no longer facing a massive budget shortfall, according to the latest state revenue forecast.

That does not mean the economic crisis has passed, however.

Legislators and Gov. Jay Inslee must still prioritize the recovery of jobs lost — or nearly gone — because of the pandemic and repeated public-health shutdowns.

That includes finding ways to reduce soaring unemployment-insurance taxes, which are increasing employer taxes by billions of dollars. Those are dollars that could otherwise be used to restore jobs and revive companies.

More here on the state budget. 

The editorial continues,

Policymakers are accustomed to big annual increases in revenue and spending. A new mindset is needed when they reconvene in January.

They need to reduce the looming surge in unemployment taxes and avoid burdening households and employers with other new taxes that impede recovery, dampen job growth and increase the cost of goods and services.
The extraordinary increase in unemployment claims has resulted in a drainedUI trust fund. Eventually, reserves must be built up again, the editorial says, but not by imposing major new taxes on struggling employers.

Even if federal support comes through, Washington is likely to need unemployment insurance (UI) tax increases to get its fund back to required levels. In July, it projected the average tax per employee would rise from $317 this year to $936 by 2022.

But averages understate the impact. In the hospitality industry, which is particularly hard hit now, thousands of employers may see their UI tax leap from $53 to at least $1,401 per employee, according to Bob Battles, the Association of Washington Business general counsel.

There are ways to avoid such unacceptable increases.

A state task force is exploring options to restore the fund without such a huge tax spike.

State Sen. Karen Keiser, D-Des Moines, is simultaneously circulating a proposal that includes some intriguing ideas for tempering UI tax increases.

Keiser suggests extending the period of time used to calculate employers’ “experience” rates, so they are a bit less skewed by 2020’s surge in unemployment claims. Another proposal would cap the “social tax” component, which is slated to nearly quadruple…

Keiser deserves credit for advancing this conversation. But some other elements of her proposal are problematic, including a dramatic increase in the taxable base wage, from $52,700 to $69,000.

Legislators could also extend the period of time required to replenish the fund, smoothing out the impact of the higher taxes.

As the editorial concludes, action must be taken before the tax increases take effect next year.

The Employment Security Department reports another increase in weekly initial UI claims. Seattle Time business reporter Paul Roberts writes,

New claims for unemployment benefits jumped sharply in Washington state last week, with some of that surge likely resulting from new pandemic restrictions on restaurants and other businesses.

For the week ending Saturday, Washingtonians filed 30,274 new, or “initial,” claims for unemployment benefits, a 79.8% increase from the prior week, the state Employment Security Department (ESD) reportedWednesday.

Nearly 8,000 of those new claims were filed by workers in food service businesses, which an ESD news release said was “likely attributed to the COVID-19 public health restrictions recently put in place.”

It’s vital to the state’s eventual recovery that assistance to these business be provided early. UI tax relief is one part of that recovery strategy.