The state must recognize and fix the past mistakes it has made in unemployment tax legislation as lawmakers search for a way to replenish the drained fund without dynamiting businesses. In the short-term, we urge the House and Senate labor
The state must recognize and fix the past mistakes it has made in unemployment tax legislation as lawmakers search for a way to replenish the drained fund without dynamiting businesses.
In the short-term, we urge the House and Senate labor committees to pass a bill this session that will mitigate the pending hike to the state unemployment insurance tax.
In the long-term, we expect to see a system put in place that doesn’t short change our future by giving tax breaks when we’re flush with money just because we can. If anything, when times are good we should be paying more into this fund and saving up for similar welfare programs so we’re ready when the going gets rough.
If the state had prudently planned for the future, it could be offering businesses an unemployment insurance tax reduction right now that would help employers to retain more of their workforce and avoid additional cuts. Instead, we’re putting on our armor to shield ourselves from the expected blow. Hopefully, state officials hear this communal plea.
The Kaua‘i Chamber of Commerce’s proposal would over the course of a few years gradually step up to the biggest tax increases necessary to refill the fund whereas current law would come up with bigger hits sooner to replenish it quicker.
Businesses could pay, on average, $1,040 per employee in 2010, up from just $90 in 2009, according to statistics from the state Department of Labor and Industrial Resources. (The actual amount a business pays per employee is based on a host of factors, such as turnover rates.) This average is projected to jump to $1,520 in 2011, $1,320 in 2012 and $1,130 in 2013 for a final balance of $900 million.
Under the Chamber’s proposal — which is a better plan than doing nothing and more realistic than the governor’s proposed 40 percent cut in the jobless tax rate — the average tax would be $910 in 2010, then up to $1,270 in 2011, $1,730 in 2012 and $1,770 in 2012 to put the final balance at $459 million. This would soften the hit for the next couple years while the economy limps along. Then, in theory, when the economy has regained its stride, the rate would be jacked up higher.
The bottom line is a 1,000 percent increase will blow a huge hole in almost any business’ budget in the current climate, but that is the hand we’ve been dealt from the state’s deck.
Hawai‘i is not alone in its trend of paying out more benefits while taking in less in unemployment insurance taxes. As House Bill 2181 states in its introduction to proposed legislation that would curb the tax hike, Hawai‘i will likely follow 24 other states as of early November 2009 in borrowing funds from the federal government in order to keep the state unemployment fund solvent. This would be true even if nothing were done.
With near-record highs of laid-off residents already drawing on the fund during these tough economic times — and a pessimistic forecast for at least the next year — it is critical that the state keeps this safety net available for those who truly need it while we try to turn the corner.
The unemployment rate crept up from 6.8 percent in November to 6.9 percent last month. (It was around 3 percent in January 2008.) Job losses have been even more severe on the Neighbor Islands, where unemployment rates last month ranged from 8.7 to 11.9 percent.
Meanwhile, fewer visitors — the bread and butter of our economy until we get serious about diversifying it — are coming to the Aloha State. The Hawai‘i Tourism Authority reported this week that 6.5 million visitors came in 2009, down 4.5 percent from 2008. Kaua‘i, in particular, saw its 2009 visitor-arrival numbers down nearly 10 percent compared to the previous year.
The good news is that we can all help — at least to a certain extent. Sadly, we all know friends or family members who lost their jobs but have since turned down other employment opportunities because they would rather cruise on unemployment for a few months or as long as they can get away with it.
This abuse of the system must stop. If it continues to proliferate, the end result will be putting your neighbor out of work because his or her employer had to lay them off after being forced to pay a drastically increased tax to refill a fund being pulled on by people who don’t actually need it. Connect the dots.
We can’t allow ourselves to rationalize laziness by saying, Well, I paid into it so it’s really just my money coming back to me. We pay this tax to help our fellow community members make ends meet while they search for another job. It’s not a paid vacation; it’s to help those who really need it.
In our opinion, the state needs to learn from its past mistakes while making the current situation a little easier for businesses to swallow. Let’s not put ourselves back in this predicament when we finally recover.
