HONOLULU (AP) — Hawaii’s business community is urging state lawmakers to postpone an unemployment tax rate hike that could cost businesses up to an additional $650 per employee. The scheduled increase will go into effect in March unless the Legislature
HONOLULU (AP) — Hawaii’s business community is urging state lawmakers to postpone an unemployment tax rate hike that could cost businesses up to an additional $650 per employee.
The scheduled increase will go into effect in March unless the Legislature and Gov. Neil Abercrombie take action.
The House Committee on Labor and Public Employment held a public hearing Friday on a bill that would keep employer contributions at the current rate — an average of almost $670 per employee.
Jim Tollefson, president of the Chamber of Commerce of Hawai‘i, told lawmakers the proposed rate hike would put too much burden on small businesses that operate on slim margins.
“It’s been testified before that businesses are now digging their way out of the ‘Great Recession’ and we’re very concerned about the impact of the (rate increase). Many of these businesses are still hanging on by their fingernails to survive,” he said. “The additional tax could push them back down into an untenable position.”
The rate hike could be not only the difference between profit and loss, but also continued operations, Tollefson added.
However, Dwight Takamine, director of the state Department of Labor and Industrial Relations, warned that if the scheduled tax rate increase doesn’t go through, businesses could end up facing a larger hike later.
“There’s never a good time to increase financial burdens or taxes in the business community,” he told lawmakers.
The tax rate is set according to how much the state has in its unemployment compensation reserve fund, which at the moment is running on empty. “During the good times you’re supposed to put away funds so during the bad times you have a reserve,” Takamine said.
The pressure on businesses won’t be relieved until the reserve is replenished, at which time the tax rate would automatically decrease. In 2007, the reserve was at $550 million, only to be exhausted by December 2010 because of high unemployment.
The scheduled rate unemployment tax rate increase would allow businesses to help build the reserve back up gradually. If the reserve remains depleted, however, it will trigger an even more significant rate hike.
Rep. George Fontaine, R-Makena-Kihei, told Takamine, “It seems like you’re assuming businesses can actually pay this.”
Small businesses might have a hard time absorbing the increase.
Roger Morey, executive director of the Hawai‘i Restaurant Association, said the restaurant business tends to run on slim margins, and in Hawai‘i, most eating establishments are small and often family-owned.
“This small but important effort on your part would be a huge aid to them,” he said.
Robert Stephenson, president of the Molokai Chamber of Commerce, echoed Morey’s sentiments.
He suggested postponing the rate hike could have a positive impact on unemployment insurance claims.
“This extension could be the make or break between keeping on extra employees or having to let them go,” he said.
The Committee on Labor and Public Employment plans to vote on House Bill 2096 Tuesday.
