Published 9:15 am Friday, January 15, 2021
Washington agricultural employers face triple-digit tax increases to replenish the state’s unemployment fund, drained by economy-wide layoffs and raided by a Nigerian fraud ring.
Gov. Jay Inslee also proposes to increase jobless benefits by about $200 million this year. To dull the short-term pain to employers, the governor proposes to somewhat restrain tax hikes in 2021.
In the long run, however, the rates that farms and other businesses pay for unemployment insurance would rise even higher.
Washington Farm Bureau associate director of government relations Breanne Elsey said Jan. 14 lawmakers should shore up the unemployment fund with state or federal revenues, until government lockdowns end.
“Many of us believe the fund will fix itself when the economy reopens,” she said. “The fund itself is incredibly resilient.”
The unemployment fund was a robust $4.86 billion a year ago. It dwindled to $1.96 billion by late last year and is projected to decline further this year as the pandemic continues.
To make matters worse, a Nigerian fraud ring scammed $600 million from the fund as of June 30, according to the state’s auditor.
Most of the money has been recovered. The Employment Security Department says losses now stand at $243 million.
Even employers who didn’t lay off workers will pay to rebuild the fund. Unemployment insurance rates are based partly on a “social tax” that spreads out the burden of paying jobless benefits when unemployment rates rise.
“Really, the hit to agriculture here is the social cost,” Elsey said.
Elsey said she’s talked to farmers whose next payments, due April 1, are increasing by 200% to 600%.
“We’ve had rates basically all over the map,” she said.
Kittitas County farmer Karen Poulsen told the Senate Labor and Commerce Committee on Jan. 13 that she has paid one $400 unemployment claim in 28 years, yet faces higher taxes.
“I have not pulled money out of the unemployment system,” she said. “I think the state should tap the federal funds first and then the general fund rather than adding the cost, especially the social costs, onto the back of employers like myself.”
Based on current formulas, the average tax employers pay on wages will rise to 1.88% from 1.03%. Under the Inslee administration’s proposal, the average tax would be 1.17% this year.
The rate would go up, but not as fast. The Inslee administration characterizes that as a tax “cut.”
By 2025, however, the bill would come due. Under the governor’s plan, the average tax rate would be 2.23%. Under current law, it’s projected to be 1.8%.
The governor’s plan also calls for increasing the minimum benefit to $270 a week from $201 a week. The state projects paying out $3.3 billion instead of $3.1 billion.
“Under the proposal, Washington will maintain the highest weekly minimum benefit amount in the nation,” said Dan Zeitlin, policy director for the Employment Security Department.
The governor’s proposal also allows older workers and those with health problems or who live with someone at risk to quit during a public health emergency and collect unemployment.
The Senate labor committee took testimony on the governor’s plan, contained in Senate Bill 5061.
It was endorsed by the Washington State Labor Council and the Washington Hospitality Association, whose members, restaurants and hotels, face crushing unemployment tax bills.
Some other business groups said that while the bill delays some of the pain, it still raises taxes during a recession. They said lawmakers should do just enough to get the unemployment fund through the pandemic, without taxing employers out of business.
“Although the system has been stressed, getting people back to work is a self-correcting mechanism and should be priority one,” Washington Retail Association lobbyist Bruce Beckett said.
