Spokane Journal of Business

The Journal’s View: Lawmakers shouldn’t punish employers for business’ sacrifices

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The unemployment insurance tax relief being hurried through the state Legislature, in part at the behest of Gov. Jay Inslee, might be a start, but it falls short of a complete fix.

There should be zero increase in unemployment insurance rates, essentially making businesses whole following their state-mandated sacrifices, due to the pandemic.

Initial notices of 2021 tax rates, issued by the Washington state Employment Security Department, include a massive, average five-fold increase in the flat social tax rate levied for all businesses to pay regardless of whether they laid anyone off. Businesses that did lay off employees also face significant charges, called rate-class increases.

The proposed rates were triggered by unprecedented withdrawals from the state unemployment insurance fund due to pandemic-induced business and social lockdowns and restrictions—both of no fault of employers.

Inslee subsequently called for legislation to reduce the increase, and a measure is proposed that includes cutting the social tax among other relief. ESD characterizes current proposed legislation as initially proposed as a 38% reduction in the average total unemployment insurance tax rate. While the final tax rate was still a moving target earlier this week, it appears it will have some measure of an unemployment tax increase in 2021, with additional significant incremental increases still possible through 2025.

The relief measure, Senate Bill 5061, was expected to reach the Senate floor earlier this week. The Association of Washington Business is supporting the measure, although it urges that the bill will be amended to extend the period for which employers won’t be held accountable for unemployment claims, says Bob Battles, AWB government affairs director.

More work also is needed to address potential large rate increases in coming years, he says, adding, “It’s not done, but it’s a good start.”

If approved by the Senate, the measure still must go through the state House, but Battles says time is of the essence so that ESD will have time to reset the rates before the first 2021 unemployment insurance tax bills are due on April 30.

Even if the relief bill becomes law, employers still likely will face higher unemployment insurance tax rates coming at a time when they can’t afford to take on added expenses that hamper their recovery.

Some say the governor should have seen this coming. Business and industry groups, including the Associated Building & Contractors, had urged Inslee, to no avail, to shore up the state’s unemployment insurance fund with federal CARES Act funding to avoid massive unemployment insurance rate increases.

Then there’s the question of how fraudulent unemployment claims paid out by the state will be resolved. While ESD says employers won’t be responsible for fraudulent claims, such fraud – estimated by the state auditor’s office at a net loss of more than $350 million as of last summer – certainly played a role in diminishing the state’s unemployment insurance fund, which, again, isn’t the fault of employers.

Even legitimate unemployment claims that arose because of the state’s lockdown shouldn’t count against employers who were forced into layoffs by state-mandated lockdowns and restrictions.

As surviving businesses try to recover, even minimized unemployment tax surges should be deemed unacceptable.

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