On Dec. 11, 2009, Gov. Christine Gregoire announced she intends to seek tax increases of 54 percent in 2010 in Unemployment Insurance rates.
No sooner had the dust settled from the Governor’s announcement than the state’s Employment Security Department announced that Unemployment Insurance taxes for the state’s employers are going up in 2010.
In a release from ESD, Commissioner Karen Lee outlined the plan that will see the average total tax rate to increase from 1.55 percent in 2009 to an estimated 2.38 percent in 2010 — a 54 percent increase, even if the 2010 rate is less than the previous recession-recovery years of 2004-05.
“Many employers will pay higher taxes in 2010 due to their own layoffs and the effect those layoffs have on their experience rate,” she said. “Employers that had no layoffs in the past four years will pay no experience tax in 2010. However, they will pay the minimum social-cost tax, which is increasing from 0.35 percent in 2009 to 0.95 percent in 2010. The social-cost tax will increase sharply because benefit payouts far exceeded taxes collected in 2009 — e.g., nearly $2 billion paid out and about $1 billion in taxes collected…”
No one could realistically forecast just how bad the economy would get and its effect on state finances. However, the recession is also wreaking havoc on our state’s business community.
Couple this with the 7.6 percent workers’ comp increase and the talk of $700 million in taxes for 2010, and this is a recipe for prolonging the economic hurt in this state, particularly for small businesses.
Earlier this year the state legislature authorized a permanent increase in UI benefits, along with a temporary increase through the end of 2009. We had concerns that bumping up the benefits, and adding a temporary “economic stimulus benefit” on top of that would draw down the state’s substantial reserves too quickly, which would force the state to raise UI taxes in the future.
Unemployment Insurance was created to aid workers with insurance benefits against the risk of losing a job. It cannot be suddenly passed off as a way to grow the economy, because it does not.
Real growth in the economy is the only way out of a deep recession. Raising UI benefits may be a laudable goal for helping those who lost jobs through no fault of their own, but passing higher UI benefits off as something that stimulates the economy is disingenuous.
As long as policymakers avoid drawing down the UI trust fund too much, they will avoid the problems that accompany “stimulus” spending — that of prohibitive transaction, opportunity and debt service costs.
But a major worry with the state increasing UI benefits through drawing down the reserve is what happens if the reserve is drawn down too far?
The coffer would have to be repaid through higher UI taxes, thus raising the cost of business in Washington and negating the benefits of any multiplying effect.
Well, that future is almost upon us.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
