Unemployment Tax rates may go up 700% and not 300% as the Employment Security Department revises its estimates

By MARK HARMSWORTH  | 
Oct 8, 2020
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On a recent TVW Inside Olympia TV broadcast, Senator Randi Becker, who serves on the Senate Ways and Means committee, quoted data she had received from the Employment Security Department (ESD) indicating ESD was projecting a 700% increase in the unemployment tax rate on Washington business next year.

This is over twice as much as the original 300% estimate that ESD had previously published.

The seven-fold increase in Unemployment Insurance (UI) rates will hit Washington business hard. While ESD has indicated it will not use a federal loan as originally thought would be necessary, it is planning on utilizing a federal line of credit, which also will need to be repaid. In reality, there practically isn’t any difference between a loan or a line of credit – both have to be repaid.

State Representative Bruce Chandler who served as ranking member on the House Finance Committee, explained to the Washington Policy Center his concern over the unemployment situation and proposed rates increases.

“It [Washington] will be become the unemployed state. People will come here to get unemployment benefits. We have a challenging situation now and increasing the unemployment tax rates will guarantee it will become exponentially worse. Washington will become the subsidy state.”

Washington businesses, with the increase in unemployment tax rates, will bear the cost of the unemployment claims.

Washington is one of a handful of states that may require employers to pay increased unemployment taxes due to COVID-19 when they reopen. Despite the vast majority of states waving the requirement to replenish their unemployment trust fund accounts, Washington will only waive the increased repayment requirement if the business had a COVID-19 infection at the business site.

As they reopen, many small businesses will be grappling with re-stocking shelves, re-filling refrigerators and re-hiring staff. The last thing they need is another big hit to their expenditures due to increased payments to cover the COVID-19 unemployment insurance claims. The majority of the layoffs are a direct result of the state ‘Stay at Home’ order in March and are beyond the businesses control.

For many small businesses, this may be the last financial straw and is likely to discourage them from re-opening again.

One piece of good news is that business will not have to pay the 0.2% solvency tax that would normally have been imposed as the unemployment fund is anticipated to remain above the required 7 months of payments.

ESD needs to reconsider the unemployment tax increases as they will financially cripple small business in Washington.